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TECH TREND Thursday: The APPLE WATCH costs under $84 to make

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May 2015

With the introduction of smart watches, the tech world and the watch world have fused. Or have they clashed? To see how the two sectors are getting along, every Thursday we keep you up to date with tech trends from the watch world. Today we look at the value you get with an Apple Watch.

Last week, we showed you how you can have a gold Apple Watch costing about $12,000 for a low, low price of only $399. But what do you actually get for your hard earned dollars besides the fact that you’re the owner of one of the most anticipated products of 2015?

Well, it seems that your money will only get you about $83.70 worth of hardware when you buy the Apple Watch. That’s right, the mark-up on your brand new watch is nearly five times the cost to produce.

IHS Technology undertook a breakdown of all the components of a 38mm Apple Watch Sport, and found that they make up about 24% of the manufacturer’s suggested retail price. Because Apple has managed to lower its hardware cost as compared to its other products, IHS Technology reports that the Apple Watch has the biggest ratio of hardware cost to manufacturer suggested retail price. In other words, the watch has the greatest mark-up in price compared to all other Apple products.

Mark-ups in retail of up to 100%, meaning double the cost, are commonly accepted. But let’s put that in perspective. According to Business Insider, sometimes there are ridiculously high price mark-ups that often consumers are not even aware of. For instance, coffee shops have mark-ups of up to 2,900%. Hiring house-cleaning inflates prices up by 5,900%. This is (somewhat) expected in the services sector.

But how does it compare to goods and other watches? If you’re lucky, the mark-up of luxury mechanical watches will be in the 50% range, with that increasing for fashion lines. Based on its hardware costs alone, the smartwatch appears to be great for Apple’s bottom line. But when considering other costs, like R&D, labour and of course marketing, which cut away a significant portion of the difference between hardware cost and retail price - it seems that Apple’s new watch will fall in line with the industry standard, at least in that regard. (VJ)

Cost breakdown of an Apple Watch Sport
Cost breakdown of an Apple Watch Sport