Apple’s HomePod smart speaker is substantially more expensive than competing devices. But there might be a good reason for that: it costs a lot to build it.
The tech giant pays $216 to build a single HomePod unit, IHS Markit told Bloomberg on Thursday after analyzing all of its components. At a $349 price, the HomePod generates for Apple a $133 profit, or about a 38% margin, on the sale of each unit, the market researcher said.
Apple is known for generating significant margins on the sale of its products. The company’s iPhone, for instance, is often sold at more than twice what Apple pays to manufacturing the handset. But according to IHS, Apple’s margins are actually lower than those earned by competitors Amazon Echo and Google Home, which tally 66% and 56% margins on the sale of each unit.
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Apple released the HomePod earlier this month. The company has pitched the small device as a high-end speaker that can fill the home with sound. HomePod is also outfitted with support for Apple’s Siri, the company’s virtual personal assistant. With Siri’s help, users can turn on music and control smart home devices around the home.
At $349, the HomePod is substantially more expensive than the $99 Echo and the $129 Google Home. However, Apple has bundled a far better speaker in the unit, which drives its price up. In fact, IHS Markit estimates Apple spends $58 per HomePod unit on its audio equipment, including tweeters and microphones. An additional $60 is spent on small components, like the device’s lights, IHS Markit told Bloomberg. The processor that powers the device costs $25.50. IHS Markit estimates Apple pays $17.50 for assembly and testing.
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To be clear, Apple has not revealed how much it actually profits on the sale of each HomePod and IHS Markit’s data is estimated because the tech giant doesn’t hand over actual pricing. In the past, Apple CEO Tim Cook has said that product cost estimates are generally wrong.