HomePod’s High-Quality Reflected By Slim Profit Margins

Apple’s profit margins for HomePod are actually slimmer than the margins generated by its other products — and slimmer than similar devices on the market.

HomePod costs an estimated $216 for Apple to build, according to an analysis report by TechInsights. With its $349 retail price, that means Apple generates a profit margin of just about 38 percent on each device.

For comparison’s sake, Amazon makes a margin of about 56 percent for its Amazon Echo speaker. Google, on the other hand, generates a margin of 66 percent. Those are higher margins despite those products’ lower sound quality, according to TechInsights. In other words, Apple is making less per HomePod (percentage-wise) than Google and Amazon are making on respective devices speakers.

The iPhone X, for example, generates margins of about 64 percent for Cupertino, while the iPhone 8 sells for a 59 percent profit margin, according to cost analysis reports by IHS Markit. That’s pretty typical for Apple devices and products.

Suffice to say, it’s uncommon for Apple to have slimmer margins than similar products on the market. But HomePod’s higher-quality audio components and internals are likely driving up its cost — and Apple may be intentionally reducing the cost of HomePod to make the device more competitive in its saturated smart speaker market.

TechInsights’ Costing Manager, Al Cowsky, speculates that Apple may be “compressing” its margins on HomePod. In other words, Apple has reduced the price from its typical margins in order to sell more smart speakers, Cowsky told Bloomberg.

As far as how HomePod’s production costs break down, TechInsights estimates the following.

• $58 for the device’s array of speaker tech, including microphones, tweeters, woofer and power management components.
• $60 for miscellaneous components, such as the LED system for HomePod’s top display.
• $25.50 for HomePod’s A8 chipset.
• $25 for external housing and “other items.”
• $17.50 for the actual manufacturing costs, testing and HomePod’s packaging.

HomePod has been widely lauded by critics and media outlets for its high-quality audio — many publications praised the device as the best-sounding smart home speaker currently on the market. On the other hand, Apple’s first smart home speaker has attracted some criticism for Siri’s lack of refinement and HomePod’s relatively poor support for third-party streaming services like Spotify.

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