The entry-level 8GB version of Google's new Nexus 7 media tablet carries a bill of materials (BOM) of $151.75, according to preliminary findings from IHS iSuppli. When manufacturing expenses are added, the cost increases to $159.25. The high-end model with 16GB of flash memory has a $159.25 BOM, for a total cost of $166.75. When additional costs are considered, IHS iSuppli estimates that Google will at least break even on sales of the 8GB model, priced at $199 -- and will make a modest profit on the 16GB version, which is priced at $249.
Table 1. Preliminary results of the teardown analysis of the Nexus 7, along with a comparison to Amazon's Kindle Fire. Please note that these teardown assessments are preliminary in nature, account only for hardware and manufacturing costs and do not include additional expenses such as software, licensing, royalties or other expenditures.
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.
"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,"said Andrew Rassweiler, senior director, teardown services for IHS. "The two platforms are similar in many regards, including the use of the 7-inch display, the eschewing of 4G wireless connections in favor of Wi-Fi, support for virtually identical battery lives and the same pricing for the entry-level models. However, the Nexus 7 has superior specifications to the Kindle Fire, giving it a more attractive feature set that may make it more desirable to consumers."
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 8GB Nexus 7 a BOM that is $18 higher than the current cost for the Kindle Fire. IHS iSuppli 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.
However, one novel part is the combination gyroscope and accelerometer from MEMS motion sensor maker InvenSense.
"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 Rassweiler.
The Nexus 7 is designed, among the other end goals of Google, to funnel users to the newly revamped Google Play store, which is where consumers can buy books, movies, TV shows, magazines, music and apps.