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IN PHOTO: A woman uses Apple Watch that is on display at an electronics store in Omotasando in Tokyo April 24, 2015. The Apple Watch goes on sale around the world on Friday, the final stage of a protracted launch of Apple Inc Chief Executive Tim Cook's first new product, capping months of publicity and a frenetic two weeks of pre-orders. REUTERS/Thomas Peter

Apple Watch may cost the consumer anywhere between $349 to $17000 depending on the model and the accessories with the product. But IHS technologies, a research and analysis company, has computed the actual cost of production to $83.70. The cost of production is a fourth of the total retail price.

IHS technologies have undertaken a “tear-down” of the Apple Watch Sport 38mm and have estimated the hardware costs to be 24 percent of the manufacturer’s suggested retail price. The most expensive part of the watch is the 1.34 inch LG touch-screen display costing about US$20.50. This is followed by the apps sensor at US$10.20 and the memory card at US$7.20. The cheapest component is the lithium polymer battery at US$0.80.

Apple CEO, Tim Cook, has disputed these claims by IHS Technologies. “I have never seen any breakdowns which come close to the real costs,” said Cook while answering the Q&A about the Q2 earnings. The manufacturing and purchase costs do not complete the whole story for any product. The marketing, research and development, advertising, distribution and many other costs are not factored in by IHS. So in reality, Apple might not be experiencing a massive return on investment for its products.

According to Forbes, analysts at IHS have confirmed that the first generation product would have a higher retail price compared to the hardware costs. “The retail prices would come down,” said Kevin Keller, the senior analyst at IHS, adding that “the ratio of cost of building and the actual price for the Apple Watch is lower than the other Apple products like the iPhone 6 Plus.” But the Apple Watch has generated high interest and matching sales would help in boosting the bottom line of the company.

Apple Watch has taken the market by storm with positive reactions coming from all sides. The product is back ordered till June. According to the Wall Street Journal, there have been long delays in shipping due to the defective Taptic engine, which produce the sensation of being tapped on the wrist. The company plans to sell in additional countries from June when the supply can meet the demand.

For questions/comments regarding the article, you may email the writer at honeygeorge74.ibtimes@gmail.com.

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