tech

Dismantle the Apple Watch, the cost is less than 700 yuan.

Published: Mar-04 ,2024

Updated: Mar-04 ,2024

Nikkei and other media outlets recently conducted a teardown analysis of Apple's latest Apple Watch and wireless earbuds, AirPods. It was estimated that the cost of components accounts for about 25% of the selling price, which is approximately half of the latest iPhone. In the smartphone market, Apple faces increasingly fierce competition from South Korean and Chinese manufacturers, and a business model that earns money through high-profit peripheral devices has emerged.

Nikkei received assistance from Fomalhaut Techno Solutions, a Japanese company engaged in electronic product teardown analysis (located in Chiyoda-ku, Tokyo), to conduct a teardown analysis of the 8th generation Apple Watch and 2nd generation AirPods Pro launched by Apple in 2022.

The cost of components for the Apple Watch is estimated to be about $100, with a cost rate of 25% of the $399 selling price. It is estimated that the cost of components for AirPods is about $54, accounting for about 22% of the selling price. The cost of components for Apple's 2022 flagship model, the iPhone 14 Pro, accounts for about 50% of the selling price, which is twice that of the Apple Watch and AirPods. It can be seen that compared to smartphones, peripheral devices have a higher profit margin.

In terms of smartphones, Apple lags behind South Korea's Samsung Electronics in terms of market share based on shipments, and also faces the pursuit of Chinese companies such as Xiaomi and OPPO. However, in the smartwatch and wireless earbud market, Apple still has a high market share. Data from Hong Kong-based research firm Counterpoint shows that in 2022, Apple's share of smartwatches based on shipments was 30%, ranking first, leading the second-ranked Samsung by about 20 percentage points. It is estimated that Apple's shipments are around 40 million units.

In terms of wireless earbuds, Apple seems to have a market share of 26% in 2021, with an annual shipment of about 80 million units. Counterpoint's data shows that in terms of value, Apple's share of smartwatches reaches 60%.

The teardown analysis also shows that Apple is taking the lead in self-designed semiconductors. The box-shaped body of the Apple Watch, about the size of a 500-yen coin and about 1 cm thick, adopts a four-layer structure at the bottom, including "heart rate measurement sensors," "main board," "vibration motor and battery for notifications and incoming calls," and "OLED display."

The main board adopts an integrated structure of semiconductor chips, memory, and memory devices. The integration effectively utilizes the space of the board. On the iPhone 14 Pro, only the main control semiconductor and memory are integrated, and the memory device is configured separately.

Due to the limitations of analysis through conventional teardowns, this time we also received assistance from Yole SystemPlus, a French company engaged in semiconductor product teardown and analysis. Detailed analysis was conducted through X-ray photography and other methods. The company's CEO, Romain Fraux, said, "Starting from the 4th generation (Apple Watch), the packaging method of putting three semiconductors together was adopted. TSMC's technology represented by 'Fan-out WLP' was used to achieve integrated packaging."

After opening the body of the AirPods earbuds, the Apple logo can be seen. This is the main board equipped with Apple's self-designed "H2" semiconductor chip for wireless earbuds. Apple has designed almost all the main control semiconductors that have become the core of its products. Not only the iPhone, but also the Apple Watch and notebook computer MacBook, Apple is expanding its self-designed range.

The charging case of the earbuds is also equipped with a control semiconductor designed by Apple. The semiconductor used for power control is a key component affecting charging and operating time, and Apple is accelerating the self-designed range for semiconductor products in a wide range of fields, in addition to the main control semiconductor.Observing the composition ratio of countries and regions using components in Apple products, in the cost of the Apple Watch, the proportion of American companies is 35%, ranking first, far exceeding South Korea's 14%. In the AirPods, American components also hold the top spot with a share of about 20%.

Apple pioneers the use of new technologies in peripheral devices

There are many instances where the Apple Watch adopts new technologies ahead of the iPhone. The first-generation Apple Watch, which was released in 2015, used an OLED display. It was two years later that the iPhone first used OLED with the launch of the iPhone X.

A representative example of the Apple Watch leading in adopting new technologies is the "eSIM" (virtual card). The Apple Watch launched in 2017 was equipped with a SIM that can be written and rewritten through software, eliminating the need for traditional SIM card space, and even a watch-sized device can communicate via a mobile phone line. The iPhone adopted this technology one year later, enabling remote changes to communication carriers and plans. Since the fifth-generation Apple Watch released in 2019, it has supported the new feature "Always-On Display" for the latest models such as the iPhone 14 Pro.

Recently, what is expected to be equipped on the Apple Watch is a display technology called Micro LED. It arranges and uses a large number of LEDs the size of microns. Compared with OLED used on smartphones, it has excellent performance in terms of brightness, durability, and power consumption. Apple has adopted Mini LED, which is filled with about 10,000 small LEDs, as the backlight of the display for the iPad series of tablet computers. Micro LED will be smaller than Mini LED.

Apple acquired LuxVue Technology, a company with Micro LED display technology, in 2014. In Japan, the Sony Group has achieved the practical use of Micro LED on large displays. Kyocera and others are also promoting technology development, and Shin-Etsu Chemical has started the commercialization of manufacturing equipment. As the next generation of OLED technology, Micro LED may become an opportunity for Japanese display technology to make a comeback.