Thursday, July 12, 2012

8GB Nexus 7 has a $151.75 BOM cost: iSuppli

Google isn't making much on its Nexus 7 tablet, but at least it's not losing money, either. IHS iSuppli, which does teardowns and estimates of bill-of-materials (BOM) costs, estimates Google's new tablet has a $151.75 BOM cost, for a device that sells for $199 (the 8GB model).

The 16GB model, on the other hand, costs Google / Asus $159.25 to build, meaning that extra 8GB of flash RAM internal storage costs only $7.50. Google sells that model for a better-for-the-bottom-line $249.

In comparison, the original Kindle Fire (we are expecting the Kindle Fire 2, soon) has a BOM cost of $133, but the hardware in the Nexus 7 is clearly superior to the Kindle Fire, with the inclusion of a front-facing camera, a better display, and a quad-core processor, among other improvements.

Manufacturing costs raise the price of the Nexus 7 by $7.50; on the Kindle Fire the cost of manufacturing is estimated at $6.

Although it looks like Google is making a profit on these devices, albeit a small one, IHS iSuppli's estimates don't include costs for marketing and the like. Thus, Andrew Rassweiler, head of IHS iSuppli's teardown team, estimated that Google will break even on the 8GB model, and see a decent profit on the 16GB model.
“Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”

For Google, like, the device itself is less important than getting consumers hooked into the Android ecosystem.

The IHS iSuppli BOM estimate is about $30 lower than an early estimate put out last month by UBM TechInsights. However, UBM TechInsights made their estimate without actual hardware to tear down.

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