Apple HomePod build cost hints at thin margins

JC Torres - Feb 14, 2018, 11:39 pm CST
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Apple HomePod build cost hints at thin margins

Knowing how much it costs a device to be built is ultimately not really of practical use to consumers, but it’s an interesting metric for many reasons. For one, it reveals just how much companies are charging on top of how much it really cost to make each product. This profit margin, as it is called, can then be used to discern a company’s vision and goal for the product. And in the case of the Apple HomePod, it seems that Apple is compressing its margins down to 38%, making up for it in sales volume instead.

At $349, the Apple HomePod is easily the more expensive choice among the big three smart speaker lines that include Google Home (not the Home Max) and Amazon Echo. It is also, though with some ongoing debate, the best sounding of the tree. Some will rationally presume that it costs quite a lot to build something of that quality and caliber. And, being Apple, some will presume that the company added a lot more on top to make a profit.

It will surprise those that the HomePod’s total build cost is just $216. That’s a profit margin of $133 or just 38% for every HomePod sold. That doesn’t seem much, especially when the Google Home’s margin is 66% and the Amazon Echo’s 56%, according to TechInsights. Although obviously not sold at cost, it’s still a pretty thin margin for someone like Apple. For an even starker contrast, the 2015 Apple Watch cost $84 to build and sold for $349.

The analyst suspects that Apple did so in order to help the HomePod sell. Any higher and it would have problems, especially considering how it’s already seen as a terribly late player. When you factor in that the HomePod currently has very limited integration with other services and even Apple’s own Siri, it might be a bit reassuring to know that Apple isn’t exactly squeezing consumers dry. Not that it makes $349 more affordable that way.

The HomePod does spend a lot on components that deliver is much-praised and sometimes criticized audio quality, $58 in total for multiple mics, tweeters, and a woofer. The biggest bulk comes from smaller components, including lighting, adding up to $60. Apple’s own A8 chip cost $25.50 apiece, while the housing and the rest total $25. Non-tangible components, like testing and packaging, make up $17.50.


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