According to a report released by TechInsights, the cost of building the HomePod speaker is approximately $216. The Apple smart speaker consequently generates profit margins that are thinner compared to other devices such as the iPhone and the Apple Watch.
Since the HomePod costs $349 apiece, Apple is consequently generating a margin of around 38% per the tech products analysis company. Similar products made by rivals such as Amazon Echo and Google Home enjoy margins of 56% and 66% respectively. However the audio quality of the two is lower than that of the HomePod.
“Apple is compressing their margins a bit, wanting to go big or go home. In doing so, I suspect they reduced the selling price from a normal Apple margin in order to sell more units on volume,” Al Cowsky, the costing manager at TechInsight, said.
Per a materials teardown done by IHS Markit, the Cupertino, California-based tech giant generates margins of approximately 64% with regards to iPhone X. IHS Markit also estimates that the price of materials of an Apple Watch launched in 2015 and which sells at a price of $349 costs is about $84.
Despite the excellent sound quality of the HomePod which has elicited praise, the tech giant has been criticized due to the fact that the integration of the smart speaker with Siri voice assistant is poor and fares badly when compared to rival products. Also Apple is trying to restrict users to its ecosystem with regards to services such as music subscription.
According to IHS most of the costs that have been incurred by Apple in building the HomePod are in the components that are used in power management, the woofer, tweeters, microphones as well as the technology of the internal speaker. These costs amount to a total of $58 but an extra $60 is incurred with regards to other smaller components such as the lighting system which is used in displaying the Siri animation.
The cost of the A8 chip is estimated to be $25.50 while the cost of the external housing plus other items adds up to $25. According to TechInsights, the cost of packaging, testing and manufacturing amounts to a total of $17.50.
The estimates by TechInsights comes in the wake of reports indicating that the HomePod smart speaker is discoloring wood surfaces. This has been attributed to the silicone base of the speaker and Apple has said the marks formed on the wood surfaces disappear after the speaker has been removed.