Monday, February 4, 2019

Margins on AirPods, Apple TV, and HomePod

Juli Clover:

On the latest episode of The Talk Show, Daring Fireball’s John Gruber discusses Apple TV and HomePod pricing and whether Apple is charging too much for some of its products.

According to Gruber, Apple is actually selling the 2017 Apple TV 4K at cost, suggesting the device costs Apple $180 to make. As for the HomePod, Gruber said he believes Apple sells it at a loss.


Gruber said that he also suspects the AirPods are priced close to cost as well, though he’s not sure and can’t prove it.

This doesn’t make a whole lot of sense to me (especially for AirPods), but I take it seriously because Gruber usually has good sources. Maybe it was accidental because the costs ended up being higher than what Apple predicted? I do think he’s right that Apple designed “too good” of a product—“good” in the sense of using high-end components that may not be valued commensurately by customers. If Apple TV 4K actually costs $180 to sell at no profit, Apple really didn’t design the right product.

Mark Gurman:

I’m told Apple is selling HomePods at a profit, not a loss, which wouldn’t make any sense. If it’s losing money, that’s only because it built too many speakers people don’t seem to want, and is now sitting on unsold inventory.

Update (2019-02-05): Joe Rossignol:

Apple’s expensive HomePod speaker accounted for just six percent of the U.S. smart speaker installed base through the fourth quarter of 2018, according to research firm Consumer Intelligence Research Partners.

Via Michael Love:

’Struggling’ implies effort, which I suspect they’re no longer applying to this, particularly if you assume that @gruber’s leak about Apple losing money on HomePod/TV was tactical in advance of March and June announcements that make that retreat official.

Previously: Initial HomePod Sales.

Update (2019-02-26): See also: The Talk Show.

8 Comments RSS · Twitter

Gurman's take is more likely to be correct. It makes more sense (when is the last time Apple sold any hardware at a loss?) and his sources have shown themselves to be more accurate than Gruber's lately, which is probably why DF can't mention Gurman's scoops without also attacking him.

Gruber has been wrong with everything about hardware cost. It just shows he has absolutely no experience in Hardware manufacturing. It is highly likely his sources are not within Apple. And from other places where HomePod and AirPod's margin are actually far below industry standards, hence the illusion of Apple selling it at a loss.

Actually the profit is related to sell price by the number of sales, so perhaps Apple just misjudged the number of sales more than the cost of components.

If the Apple TV 4K costs 180$ to make, some people at Apple need to get fired.

Agree this seems dubious particularly on the Apple TV. Don't know on the HomePod, although it is fair to point out companies that in the initial production lose money but make money as component costs come down over time. I believe the Xbox is like that for instance. Putting the A10X in the AppleTV its first year may well have lost money but I suspect by now that's completely changed. Don't get me wrong, I'm still pretty skeptical. It doesn't sound like Apple. But it's not completely unfathomable the way some are portraying it.

That said, I definitely do think Gruber was right that Apple's selling too well made of products for a market that wants something cheaper. A HDMI stick based AppleTV is something Apple should consider, for instance with a cheaper plastic remote minus the touch and Siri. Likewise as nice as the HomePod is according to everyone who has one, I think the market just wants some Siri pucks with a normal laptop speaker and a moderately good mic for $30 they can place around the house.

Gruber also said that Apple didn’t upgrade iMac in 2018 because 2017 iMacs are basically good enough and there’s no point in updating them. Meanwhile MacMini with a mobile i7 CPU will crush any 2017 iMac with a desktop class CPU. Mini has quite an advantage both in single core performance, and for multi core as well.
And they also offer terrible configurations with HDDs and Fusion Drives.

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