RobDK commented in my previous post that Jonny Ive talked a fair amount about the Watch module in his video. That video is no longer available (it’s now marked Private on YouTube), but some of the images from that video are still around, and others have analyzed them. Chipworks claims to have identified one of the chips as a Broadcom WiFi chip.

What I find interesting, though, is the fact that Apple itself says that the Watch components are fully integrated onto one module and then encapsulated in resin. If you look at how the module is integrated into the case, it rests in a (presumably CNC-milled) repository as shown in the image above.

Further, Apple’s own technology Web page says the following:

“Massive constraints have a way of inspiring interesting, creative solutions. A prime example is the custom-designed chip at the heart of Apple Watch. No traditional computer architecture could fit within such a confined space. So we found a way to integrate many subsystems into one remarkably compact module, which is then completely encapsulated in resin to protect the electronics from the elements, impact, and wear. Configuring an entire computer system on a single chip is an industry first and represents a singular feat of engineering and miniaturization.”

Now we know that Apple is making two different sized cases for the watch, but these images now make me believe that Apple is NOT making two different sized modules. Instead, I think Apple is making one sized module and simply machining the two different sized cases so that the same module fits both.

Bottom line: This doesn’t really change my prior analysis, but it means that the Apple Watch module manufacturing costs are even lower than I had originally calculated. It reinforces my belief that the gross margins on Apple Watches will be high compared to their iPhone and Mac businesses.