The entry-level 8 GB version of Google’s new Nexus 7 media tablet carries a bill of materials (BOM) of $151.75, according to preliminary findings from the IHS iSuppli Teardown Analysis Service. When manufacturing expenses are added, the cost increases to $159.25. The high-end model with 16GBytes of NAND flash memory has a $159.25 BOM, for a total cost of $166.75.
When additional costs are considered, IHS estimates that Google will at least break even on sales of the 8GByte model, priced at $199—and will make a modest profit on the 16Gbyte version, which is priced at $249.
Like Apple, Google has realized it can boost margins by offering more memory at a more profitable price point. Google is charging $50 more at retail for only $7.50 in additional memory cost at the BOM level. This adds $42.50 to Google’s bottom line on each sale of the high-end model, says iSuppli.
Andrew Rassweiler (Senior director, Teardown Services, IHS): Google’s Nexus 7 represents less of an attempt to compete with Apple’s market-leading iPad, and more of a bid to battle with Amazon’s Kindle Fire.
The Nexus 7 distinguishes itself from the Kindle Fire with its higher-resolution display using in-plane switching (IPS) technology. Google’s tablet also employs a quad-core Tegra 3 processor from Nvidia,compared to the Kindle Fire’s OMAP 4430 dual-core processor from Texas Instruments. The Nexus 7 also includes a camera and sports a near-field communications (NFC) chip for wireless commerce—both features absent on the Kindle Fire.
These additional features give the 8GByte Nexus 7 a BOM that is $18 higher than the current cost for the Kindle Fire. IHS now estimates the BOM of the Kindle Fire has fallen to $133.80, down from $191.65 at its introduction in November, due to dramatic reductions in component pricing. These considerable cost reductions provide a breather for Amazon in terms of the subsidy it initially paid to penetrate the market.
The component suppliers in the Nexus 7 offered few big surprises, with almost all the parts having been detected in other media tablets by the IHS iSuppli Teardown Analysis Service. However, the combination gyroscope/accelerometer from InvenSense was novel.
“Although we have seen a lot of InvenSense gyroscopes, we have seen only one other combo device—a part from STMicroelectronics in the Samsung Galaxy SIII. Furthermore, the InvenSense part integrates onboard processing, a newer feature for MEMS sensors,” said Mr. Rassweiler.