Estimates give Pixel Watch higher profit margins than an Apple Watch – Ars Technica

Pixel Watch.  It's a perfect, round little pebble.
Magnify / Pixel Watch. It’s a perfect, round little pebble.

Ron Amadeo

Why is the Pixel Watch so expensive? The devices’ $350 and $400 price tags are well above the closest comparable products from Apple and Samsung, especially considering that Google’s first-generation smartwatches use slower, older parts compared to other products. The company charges more for less, and while the Pixel Watch is a nice piece of hardware, it’s hard to make the price make sense compared to faster products with better parts, like the $250 Apple Watch SE and $280 Galaxy Watch 5.

Counterpoint Research’s report details the Bill of Materials (BoM) for Google’s Pixel Watch, concluding that the $400 LTE version device costs $123 to build. Companies always need to build large profit margins into their products to cover R&D, labor and other costs, and to justify the endeavor, but the $123 BOM shows that Google is just charging more than the competition rather than facing some kind of supply chain problem.

For comparison, we can look at Counterpoint Research’s most recent materials estimate for the Apple Watch, which occurred in 2021 for the Apple Watch Series 6. The Series 6 had an MSRP of $400, the same as this LTE Pixel Watch, but Counterpoint’s bill of materials had it costing more than Pixel Watch: $136. Just like how it feels in the market, Counterpoint says Apple offers more watch for less money. Apple is a company known for having the highest profit margins in the industry, but comparing these estimates would give Apple Watch a profit margin of 66 percent, and Google a margin of 69 percent.

That doesn’t even include the hidden cost of the Pixel Watch: Google’s watch band. Samsung and Apple let you buy a watch case and then choose the watch band you want to pair with it, so you only pay for the watch band you want to wear. Google forced everyone to buy the bottom layer of the rubber watch band with the Pixel Watch ($50 accessory), and if you want a better style band, it will cost extra. To make matters worse, the clock is included three watch band halves to cover large and small wrists – you choose the size you want and discard the extra half. It feels like Google wanted to cut down on the logistics of stocking a smartwatch, forcing customers to pay extra for watch band components they don’t need and generating unnecessary e-waste.

Counterpoint Research's breakdown of Pixel Watch costs.
Magnify / Counterpoint Research’s breakdown of Pixel Watch costs.

Counterpoint research

The report also provides a breakdown of where Google is spending that $123, and it’s not much different from the Apple Watch breakdown. Samsung gets a lot of praise as one of the big component winners in the Pixel Watch debacle. The Pixel Watch has Samsung’s Exynos 9110 SoC and a Samsung modem, both manufactured at a Samsung foundry, so Samsung accounted for 20 percent of the total BoM costs. The 9110 is a 4-year-old chip, and Samsung’s own watches offer the newer, faster, more power-efficient Exynos W920 for less money.

In second place is China’s favorite display manufacturer, BOE, which scored 14 percent of BoM according to this estimate. BOE supplied the 1.2-inch OLED screen and is the main rival of Samsung’s display division today. A common criticism of the Pixel Watch is the large display bezels, which could have been fixed with a better display supplier.

While the Pixel Watch is overpriced, at least this is a fixable problem. Second-gen watch – hopefully Google builds a second-gen watch – needs to be priced in line with the competition with specs to match. Google needs to let people buy only the watch bands they want to cut down on hidden costs and e-waste. The company also needs to get its rebooted Wear OS ecosystem into a decent state, though it’s making progress with it every day. We are also still waiting for the metal bands to be launched, which will happen sometime this spring.

Leave a Reply

Your email address will not be published. Required fields are marked *