Apple Watch could be company's 'most profitable product ever' -

Mr Howe asserts that Apple deliberately restricted the initial production run of Apple Watch in order to keep inventory costs low.

"Apple is offering 38 different models of Apple Watch and it has no order history to go on," he said.

"Instead of guessing at the right mix of models to manufacture, I believe that while Apple has manufactured a large number of Apple Watch electronics modules, it will perform the final assembly of actual products – the unique combinations of module, case, and band – to order."

Despite offering 38 different models of Apple Watch, Apple only needs to make two sizes of the electronics module – 38mm and 42mm – because these parts are used in all the models of Apple Watches made.

The only real difference between the models is the cases and bands, and this is where Apple has positioned its smartwatch products to earn exceptionally high margins, by aligning prices with jewellery rather than electronics.

"The core electronics modules in the expensive models are the same ones used in the Sport models, and they just don't cost that much," said Mr Howe.

"While adding Gold cases and designer bands add cost to the bill of materials, the costs are small compared to the price premiums paid for these products."

Mr Howe predicts that Apple will begin ramping up production to more than 2 million units a month during May and June, resulting in another 4 million or so units to be shipped prior to the end of the second calendar quarter.

"I don't believe that this increased production will satisfy demand however, and I expect Apple Watches to be on back order through much of the summer," he said.

Last week, Apple retail chief Angela Ahrendts confirmed in a memo to staff that the Apple Watch will not be available to buy in-store from Friday and throughout May.

Customers instead will be prompted by staff to order their Watch of choice online in order to receive it faster, a decision Ms Ahrendts said had "not been easy".

"Are we going to launch every product this way from now on? No. We all love those blockbuster Apple product launch days – and there will be many more to come," she wrote.

"It's important to remember that Apple Watch is not just a new product but an entirely new category for us. There's never been anything quite like it. To deliver the kind of service our customers have come to expect – and that we expect from ourselves – we designed a completely new approach. That's why, for the first time, we are previewing a new product in our stores before it has started shipping."


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