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Apple keeps slim profit margin on HomePad speaker, which cost $216 to build

Mark Gurman | Bloomberg/ 15 Feb 18 | 08:52 AM

Apple HomePod Speaker Photo: Bloomberg

Apple Inc.’s HomePod, the company’s first foray into speakers in a decade, costs $216 to build and generates thinner profit margins than other products like the Apple Watch and iPhone, according to analysis by TechInsights.

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Given the HomePod’s $349 price, that $216 cost suggests Apple is generating margins of about 38 percent, according to the product analysis firm. That compares with margins of 66 percent and 56 percent for the Google Home and Amazon Echo, products that compete in the smart-speaker market, but offer lower audio quality, according to the firm’s estimates.

“Apple is compressing their margins a bit, wanting to go big or go home," said Al Cowsky, TechInsight’s costing manager. “In doing so, I suspect they reduced the selling price from a normal Apple margin in order to sell more units on volume."

For comparison, the Cupertino, California-based company generates margins of 64 percent on the flagship iPhone X, according to a materials teardown by IHS Markit. A $349 original Apple Watch from 2015 was estimated by IHS to cost only $84 for the materials.

Apple’s latest hardware product has won praise for its sound quality but criticism for the lack of smooth integration with the Siri digital voice assistant and the inability to work tightly with some popular outside applications, unlike its rivals. Apple, like Inc. and Alphabet Inc.’s Google, wants the HomePod to keep consumers tied to its system of services like its music subscription.

The bulk of the HomePod’s costs come from the internal speaker technology, including the many microphones, tweeters, the woofer and the power management components. That adds up to $58, while an additional $60 includes various smaller parts like the lighting system used to display the Siri animation on the top of the device.

The HomePod’s A8 chip is estimated to cost $25.50, while the external housing and other items come in at $25. TechInsights also estimates manufacturing, testing, and packaging to add up to $17.50.

Apple didn’t respond to requests for comment on the HomePod materials analysis. Apple Chief Executive Officer Tim Cook commented on component breakdowns in 2015 during an earnings call by stating he has “never seen one that is anywhere close to being accurate."

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