Have you ever looked at an Apple Headphone and thought to yourself: how much does it cost to make Apple headphones, and why are they so expensive? It’s your lucky day because we have the answer for you right here.
The prices for the Apple Airpods are definitely through the roof. With the original model priced at $159, buying these headphones should be troubling, especially if you are like me and keep losing one! But the ultimate question here is, how much does it cost to make Apple headphones, and how much extra are you paying?
Are AirPods Worth It?
If you have not been living under a stone, you know all about Apple Airpods and the ruckus the product caused when it was first released.
The original Airpods cost you a pretty sum of $159, and that is without the charging case. This price continues to increase with the introduction of newer versions, the latest version, Apple Airpods Pro Max, being $549.
When you spend that much on a pair of earphones, you have got to be interested in what it entails and how much profit Apple is making on a single pair.
Well, according to Wedbush analyst Dan Ives, the cost of manufacturing for AirPods is hardly $59–$69. It appears that Apple is making a pretty sum of $90–$100 by selling them for $159. Wow!
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Cost of Production
When we talk about the cost of production, we include raw materials, labor, and many other things, but we need to keep in mind that marketing and engineering costs do not count as manufacturing costs. These costs are a part of a project and should count under the cost of undertaking the project. A single AirPod is, thus, a profitable unit on its own.
Headphones are generally pretty affordable. If you know anything about off-hand products, you already know that these little speakers can be produced for a minimum amount that is not anywhere near the value that apple charges.
Place of Production
Much like most cheap, low-quality products flooding the markets these days, Apple AirPods make use of inexpensive labor in China to reduce production costs.
However, we need to keep in mind that these headphones manufactured in China are made from premium materials. We also need to acknowledge that these are not regular Apple EarPods. They make use of Bluetooth technology, accounting for most of its price.
The cheap labor definitely should have made these Airpods much more accessible, but then why do these cost $159 per unit, how much does it cost to make Apple headphones, and why are these AirPods burning a hole through your pocket?
To answer this, we need to consider the manufacturing process.
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With the shocking price for these tiny headphones, you must question what material goes into them and, therefore, how much it costs to make Apple headphones.
Aside from the cheap labor, we must remember that these are not regular wired headphones and are the most compact Bluetooth headphones ever produced commercially. Combined with this, Apple Airpods is also the first-ever model for wireless earbuds.
But what is it that makes them so expensive? The W1, W2, and H1 SiP packages within the Airpods. I just unloaded a bunch of terms on you; what are these packages?
These are chips that are at the heart of your EarPods and are exclusive to Apple. Apple designed these chips and holds the patent for their technology. These chips are the reasons why Apple AirPods are so small. These chips are also what accounts for a large portion of the headphone’s cost.
But you are spending more than a hundred dollars on these Airpods, and they are mass-produced. This mass-production and, thereby, manufacture definitely reduces the cost of these chips.
Since Apple orders millions of them every quarter, the chip won’t be much more expensive than other comparable chips of similar size and function.
Assembly and Labour
The manufacture and labor are what account for why Apple AirPods are so expensive. The small chips that Apple introduced are very difficult to put together.
Assembling these tiny pieces into your compact and easy-to-use AirPod requires a lot of efficiencies and specialized labor. Since these are some of the tiniest Bluetooth headphones introduced in the markets, the AirPods also features one of the tiniest logic boards/FPCs ever.
These parts then require equally small ICT fixtures, pins, and other costly production equipment that are just as tiny. Since this equipment has a finite lifespan, you cannot really write them off as fixed costs. We need to include their costs within the value of a single unit of Airpods. This cost, therefore, will be absorbed by the material cost.
When these tiny units are finally assembled together, the finished FPC must be folded into the casing and should be properly soldered with batteries and speakers. Then the glue should be filled and ultrasonically welded shut. We must remember that all of this is very difficult to achieve, especially with tiny particles.
This meticulous process often results in errors that are not noticed until the very end of the production process.
These unnoticed errors result in several units of AirPods getting destroyed as they are unsalvageable at that stage. This possibility of human error decreases yields and increases the production cost of Apple headphones as a whole.
Low yield issues must have plagued early manufacturing experiments and even early mass volumes. And even with cheap and skilled Chinese labor, this isn’t easy to overcome.
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The manufacturing cost and the cost of labor cost make it seem like there would not be a profit of more than 30%, but you would be wrong to think that. As already mentioned before, for a pair of Airpods costing $159, Apple makes a profit of $100. This is almost 67% profit per unit.
You would think that the production would bring AirPods much closer to the 30–30–30 margins that are cited by others, but if you only look at materials and assembly costs, they are almost certainly still around 30%.
There are still some aspects which we have not considered. For example, for non-water sports and exercise, the Airpods Pro was designed to be sweat and water-resistant.
Apple performed testing in February 2019 utilizing pre-production AirPods 2nd generation charging case and wireless charging case units and software, as well as prerelease software, using iPhone XS max units. While these are new features that provide quality service, these costs add to the cost of the final unit.
Research and Development
After all this, there is only one more thing left to consider, the amount of money invested in the Research and Development of the project.
The research used to build the technological basis for easy-to-use and dependable true wireless headphones may easily be in the billions of dollars, but this has secured Apple’s leadership position for years to come. So Apple can recover these costs as soon as they are procured.
It Costs Nearly $59-$69 to make Apple Headphones.
So, we can say that the cost for making these headphones is quite a lot, but Apple also secures quite a profit for itself so, if you are wondering what cost that much in those Airpods you have, you are paying for the first compact Bluetooth Earbuds.