Apple settles for uncharacteristically low HomePod profit margins to score volume
Apple is known (and often criticized) for pursuing hefty profits more aggressively than all other major smartphone, tablet, PC and smartwatch vendors in the world. But after refusing for so long to make quality compromises in the name of iPhone sales volume in key global markets, Tim Cook may have recently accepted a slight deviation from standard company practice.
Don’t worry, there’s no reason to believe the long-awaited HomePod cuts any audio performance or build corners. Quite the opposite, as Apple reportedly threw caution to the wind, going big with the sound technology of its first ever smart speaker, regardless of unusually high production expenses.
According to a thorough TechInsights teardown analysis, every HomePod unit costs an estimated $216 to build, yielding a modest margin of around 38 percent at a $349 retail price.
That’s comparatively modest with the typical margins of Apple hardware, considering the $999 iPhone X, for instance, carries a $370 or so bill of materials. The HomePod costs roughly as much to manufacture as a 32GB iPhone 7 back in the day, and the latter started at $649 in authorized stores. Then there’s the Apple Watch, which saw daylight almost three years ago at $349 and up, requiring a measly sub-$85 investment per unit.
Believe it or not, the profit-hungry Cupertino tech giant is even willing to settle for thinner margins than direct rivals Google and Amazon, as the former’s Home and latter’s Echo products generate estimated margins of 66 and 56 percent respectively.
Obviously, the aim is to “sell more units on volume”, with audio quality crushing the competition. After all, the HomePod could make serious money by boosting Apple Music subscriptions as well.