Apple Might Actually Be Losing Money on Its HomePod and Apple TV Devices

Apple Tv 4k Credit: 9to5Mac
Text Size
- +

Apple is known for having a high profit margin on its devices, but a recent reports suggests that may not be the case across the board.

That report comes from Daring Fireball’s John Gruber, who recently delved into some notable product pricing details in the latest episode of ‘The Talk Show’ podcast.

Citing an “reliable little birdie,” Gruber contends that the company may not be making all that much money on its HomePod and Apple TV devices.

Gruber said his source tells him that the Apple TV is actually sold at cost. In addition, Gruber said he has “reason to believe” that Apple actually sells its HomePod smart speaker at a loss.

What that means, basically, is that the Apple TV 4K costs the Cupertino tech giant about $180 to make. That includes the A10 processor and other internal components, as well as marketing and research and development costs.

The A10 processor is believed to run Apple about $26 a pop, which means that the other components and associated costs have to make up about $154 for Gruber’s claims to be accurate.

Gruber also said he’s heard a similar story for HomePod, saying that Apple actually sells the smart speaker at a loss despite its relatively high $349 price tag. Though he added that he “can’t prove it” and doesn’t think that it’s a big loss.

According to a previous teardown, HomePod is thought to cost about $216 for Apple to make. That’s a fairly slim margin on its own, but if Apple indeed sells it at a loss, it would mean that its R&D and marketing costs are quite high for the device.

It’s a relatively surprising claim for a company that has infamously high margins on its devices. Gruber points out that Apple’s other product margins generally sit around the 38 percent.

“Over time, things get cheaper to make,” Gruber said. “Company-wide, Apple very famously has very high margins and somehow, almost to a spooky degree, it’s always around 38 to 39 percent.”

On the other hand, it’s worth noting that another reliable, Apple-focused journalist has refuted Gruber’s pricing theories. Bloomberg’s Mark Gurman recently tweeted that his sources indicate that both HomePod and Apple TV are actually sold at a profit.

As Apple blogger and iOS developer Benjamin Mayo puts it, “Apple really would be doomed if they couldn’t make a profit on selling a $180 A10 chip in a plastic box.”

Of course, we can’t confirm whether Gruber or Gurman is correct. But in Gruber’s case, it would make sense for Apple to sell its services-based products for a lower margin, as it could recoup those costs through purchases and subscriptions (iTunes and Apple Music).

Gruber’s comments come in the wake of a report suggesting that Apple is developing a low-cost Apple TV “dongle,” akin to an iPod Shuffle. Presumably, that would allow users of third-party TVs to buy or watch iTunes content — or stream TV shows and videos from Apple’s upcoming rumored original content platform.

Recommended

Today's Deals
Social Sharing