The Apple Watch is the company’s “most profitable product ever,” according to a leading technology analyst who has posted estimates of the amount of money the device has generated for the company.
Think Big Analytics principal Carl Howe, a reputable source in the industry, has estimated the number of sales of each version of the Watch, claiming that 3 million devices have already been sold by Apple. This number is comprised of 1.8 million Sport models, 1.2 million steel and 40,000 of the high-end Editions. The total amount of revenue these sales will have generated is $2 billion, with gross margins being estimated at 60%. This would therefore make the Apple Watch more successful than any iPhone, iPad or Macbook the company has yet released.
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Howe’s research was conducted using polling results of model orders, Slice sales data and Quanta production estimates, and though the numbers haven’t been confirmed by Apple, the estimates that can be drawn from these three sources certainly suggest that Howe’s numbers won’t be far off the truth.
The key factor behind the Watch drawing in big money is the high cost of the products, with sales of the Apple Watch Edition paling in comparison to those of the Sport and Steel, though the $10,000 – $17,000 price bracket ensuring that they make up a large percentage of the Watch’s overall profits. Howe also states that the tech used in the Edition models is the same as those used in the other versions of the Watch, meaning that they’d have a much higher profit margin.
Estimates suggest the Apple Watch Edition only made up a small number of sales of the device, but its hefty price tag made it the most profitable version.
In a post on his blog, Howe wrote:
What about margins on these products? I think I’ll save that analysis for another posting, but my belief is that the Apple Watch product line will become Apple’s most profitable product line ever, with gross margins exceeding 60 percent. Why? Because the core electronics modules in the expensive models are the same ones used in the Sport models, and they just don’t cost that much. And while adding Gold cases and designer bands add cost to the bill of materials, the costs are small compared to the price premiums paid for these products. Unlike in the consumer electronics business, I see no pressure for prices to fall and if anything manufacturing costs will, resulting in a very profitable business.
Howe also stated that he believed those looking to buy an Apple Watch who haven’t already pre-ordered the device will be waiting for a lengthy period of time, writing:
I believe that the 3 million Watches already in flight to consumers are simply Apple’s seeding of the market prior to adjusting the final assembly mix to the actual order flow. I also believe that Apple and Quanta have probably gained enough experience at this point to begin ramping up production to more than 2 million units a month during May and June, resulting in another 4 million or so units to be shipped prior to the end of the second calendar quarter. I don’t believe that this increased production will satisfy demand however, and I expect Apple Watches to be on back order through much of the summer.
With the Apple Watch Edition having already completely sold out in China, Howe’s suggestion that this could be Apple’s most profitable product ever seems likely. While its critical reception has been mixed, it seems there’s no stepping Apple when it comes to new product releases.
