The $349 HomePod costs Apple $216 to build as per an analysis by TechInsights. The product also carries a thinner profit margin for Apple compared to the likes of the Apple Watch, the iPad, and iPhone.
The analysis done by the firm points to the HomePod having a 38 percent profit margin which is far lower than the 66 and 56 percent margins enjoyed by Google Home and Amazon’s Echo. But then the other two offerings also have inferior music quality when compared to the HomePod.
The internal speakers, bunch of microphones, the tweeters, woofer, and the power supply and management system cost about $58. The A8 chip alone costs $25.50, while the external housing costs another $25. The lighting system used for Siri on top of the HomePod coupled with other small components cost around $60. For manufacturing, testing, and packaging, TechInsights has estimated the cost to be around $17.50.
“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.”
Before you start bashing Apple for selling a $216 speaker for $349, remember that the numbers above are just estimates from a firm. Apple has been developing the HomePod and the technology behind it for years now. While other companies in the smart speaker market just end up using off the shelf parts, Apple went ahead and designed every single component inside the HomePod on its own. No wonder then that the speaker has such impeccable sound quality that rivals the like of a $999 Hi-Fi speaker.
The HomePod might generate thinner profit margins for Apple but one must take into account that HomePod users need to also take an Apple Music subscription to enjoy the smart speaker to the fullest.