With retail price points of $199 and $249 for the 8GB and 16GB versions, respectively, Google and Asus appear to have a good margin on the devices. The 16GB variant, in particular, has a significant margin of nearly $90. The 16GB variant costs only $7.50 more to manufacture than the 8GB version, but Google is charging $50 more for it.
Andrew Rassweiler, one of iSuppli's teardown analysts, believes Google will break even on the 8GB Nexus 7 after shipping, advertising, and other costs are factored in. However, Google should make a nice profit off the 16GB version.
[ For more analysis of the Nexus 7 tablet, see Complete Google Nexus 7 Teardown. ]
"Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point," wrote Rassweiler. "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."
Why such a big difference? TechInsights came to its cost-analysis conclusion without actually tearing the device down, which iSuppli did. TechInsights got its hands on the Nexus 7 later, and offered this teardown.
The Nexus 7's core components include: NVIDIA Tegra 3 Quad-core mobile applications processor; Broadcom BCM4751 Integrated Monolithic GPS Receiver; InvenSense MPU-6050--Six-Axis (Gyro + Accelerometer) MEMS Device; AzureWave AW-NH665 802.11n WiFi / Bluetooth/FM Radio module; and an NXP Semiconductor PN65 Secure NFC Module. Other component suppliers with a hand in the Nexus 7 include Hynix, Kingston, Maxim, Texas Instruments, Fairchild, and ELAN Microelectronics.
IHS iSuppli believes the Nexus 7 costs about $18 more to make than the Amazon Kindle Fire, which is its direct competitor. The difference is due mostly to a higher-quality screen and a camera module found in the Nexus 7. However, the cost of materials for the Kindle Fire will likely rise later this year when Amazon debuts a new version of its tablet.
Beyond the guts of the device, of course, is the software running it all. The Nexus 7 ships with Android 4.1 Jelly Bean, but was recently updated by Google to Jelly Bean 4.1.1. The biggest addition of the new system software is Google Wallet, which gives the Nexus 7 the power to make NFC-based mobile payments.
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