Apple sells the HomePod smart speaker at $349 per piece but reportedly pockets only a slim profit. Building the new product, the company spends $216 for every unit.
According to analytics firm TechInsights, Apple is poised to generate profit margins of 38 percent with the HomePod, which by any account is more than decent. However, a closer look on the company's other top-performing products, it would seem the HomePod will not become the next cash cow for Apple.
The iPhone X, for instance, represents a whopping 64 percent profit generator for the company and the same can be said for the Apple Watch. The wearable is produced at a cost of $84 per unit but the retail price starts at $349.
It appears that Apple has intentionally set a selling price for the HomePod that initially will not lead to a windfall, which Bloomberg said is bold and strategic.
“Apple is compressing their margins a bit, wanting to go big or go home … They reduced the selling price from a normal Apple margin in order to sell more units on volume," the publication said, basing on the analysis provided by TechInsights.
HomePod Build Cost Breakdown
In the same report, Bloomberg revealed that the HomePod internal components proved the most expensive parts of the product. The entire package responsible for the Siri lighting animation on top of the speaker was billed at $60. Coming in second is the mechanism that consists of the speaker, microphone, and power management technologies that Apple paid for at $58.
As expected, the A8 processor that controls everything about the HomePod is among priciest of the HomePod inside parts. The chip was priced at $25.50. The estimate by TechInsights rounded up the HomePod balance of build expenses at $42.50, which covered for the manufacturing, testing, packaging, and other items.
It's interesting to note that while the HomePod is way more expensive than any of the Google Home and Amazon Echo speakers, the latter two are poised to deliver more profits. As a form of consolation though, earlier reviews readily picked Apple's bet in the smart speaker competition as the more superior in terms of audio quality.
Prohibitive Cost Of Repair
More interesting if not shocking, however, is the cost that Apple wants to charge on customers in case the HomePod will require repair or replacement. In the United States, the bill amounts to $279 outside of the warranty period or minus the protection provided by AppleCare+.
Surely it is nearly scandalous that Apple saw it fit to charge more than the amount it took to fully assemble the HomePod but thankfully there is an alternative. With AppleCare+ in effect, which extends the product warranty by up to two years, the cost is significantly whittled down, starting at $78.