This watch cost $1.15, roughly one sixth of the cost of the other watch I examined during this project. It's a goofy little watch, apparently intended for a small child — a turquoise-colored guitar, with a strap too short to reach around my wrist. Unlike the other watch, it rapidly separated into its component parts when I threw it against a piece of concrete. It did survive brief immersions in water, though (a minute or so).
The most interesting thing about this watch is that electronics exist at all at this price. In the Toys 'R' Us I visited in the US, electronics usually seem to start around $20 (occasionally $10), although there are many non-electronic toys in the store priced at $1-$9.
Amusingly, the back reads, "Audel. Water Resistant. Japan Quality. Made in China."
The guitar face is lightly glued onto the front of a more or less generic watch assembly, around a convex plastic crystal that serves to magnify the rather tiny LCD, which is part of a generic watch interior. A printed thin plastic insert behind the crystal matches the "guitar" motif of the face and straps. The plastic back seems to have a tiny rubber O-ring to keep out water. All of these parts just snap together, except for the glued-on face.
The watch has an LR41 button cell, a chip, two bits of metal pressed by the buttons (and two more bits of metal pressed against the circuit board for contacts), what seems to be a 32.768kHz clock crystal (labeled KDS4E) sticking out the side, and a zebra-stripped LCD with 3.5 seven-segment digits. The printed circuit board is attached to the plastic body with four #00 Philips screws, which hold it in contact with the zebra strip and the two bottom button contacts.
The chip (under its epoxy blob, but faintly visible through the other side of the PCB) is teensy.
Presumably you could change the chip (without making it larger) without changing the device's bill-of-materials cost. However, it behaves exactly the same as the two-button digital watches I remember from more than 20 years ago, so it wouldn't surprise me if the NRE expenses per chip were zero.
The button mechanism consists of a top-contact tab of metal attached to the positive side of the battery, which can be pressed against a bottom contact of metal slotted into a spot in the plastic body, pressed against a contact area on the circuit board by the screws. One of these fell out when I disassembled the watch, and it took me a while to figure out where it went. In some of the photos, you can see it floating around the back of the LCD.
It's really interesting that you can buy an electronic device at retail for under US$2. I suspect that the main watch body (the part held together with the 4 screws) has truly enormous volume and hasn't changed in a decade or more, so the applicability of this information to my project is questionable. Still, it represents an interesting study in just how cheap things can get.