Google Nexus 7 parts estimated to cost $152
The parts that make up Google's new $199 Nexus 7 tablet have been estimated to cost $152, suggesting the company could eke out a small profit after development costs are accounted for.
IHS iSuppli published the results of its Google Nexus 7 teardown on Wednesday, and estimated that the bill of materials of the $199 8-gigabyte model is $151.75. When manufacturing expenses are added, the research firm believes the total cost is $159.25.
The bill of materials for the 16-gigabyte model, which sells for $249, is estimated to be $159.25, while manufacturing would bring the total cost up to $166.75. The bill of materials and manufacturing costs do not include other expenses, like research and development that lead to the creation of the Google Nexus 7.
Google's Android chief, Andy Rubin, admitted that Google's own profit margins for the device are extremely low. He said sales of the Google Nexus 7 through the Google Play store will provide "basically" no profit margins to the company.
Market watchers believe the Nexus 7 is more of a response to Amazon's Kindle Fire, also priced at $199, than Apple's iPad, which starts at $399 for the iPad 2. iSuppli estimates that the 8-gigabyte Kindle Fire has a current bill of manufacturing cost of $133.80, and with manufacturing costs Amazon $139.80 to produce.
Those costs are lower than estimates from last September, when the Kindle Fire was first unveiled. Though Amazon has been able to improve margins on its 7-inch touchscreen tablet over time, original estimates suggested the online retailer was losing as much as $50 per Kindle Fire sold, money the company presumably planned to offset with sales of Kindle books and other goods and content through its online storefront.
IHS believes the bill of materials from the Kindle Fire has fallen nearly $60 from the $191.65 it was estimated to cost when it first launched last November. iSuppli said Amazon has benefitted from "dramatic reductions in component pricing" that "provide a breather for Amazon in terms of the subsidy it initially paid."
"The (Nexus 7 and Kindle Fire) 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," said Andrew Rassweiler, senior director, teardown services for IHS. "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."
IHS iSuppli published the results of its Google Nexus 7 teardown on Wednesday, and estimated that the bill of materials of the $199 8-gigabyte model is $151.75. When manufacturing expenses are added, the research firm believes the total cost is $159.25.
The bill of materials for the 16-gigabyte model, which sells for $249, is estimated to be $159.25, while manufacturing would bring the total cost up to $166.75. The bill of materials and manufacturing costs do not include other expenses, like research and development that lead to the creation of the Google Nexus 7.
Google's Android chief, Andy Rubin, admitted that Google's own profit margins for the device are extremely low. He said sales of the Google Nexus 7 through the Google Play store will provide "basically" no profit margins to the company.
Market watchers believe the Nexus 7 is more of a response to Amazon's Kindle Fire, also priced at $199, than Apple's iPad, which starts at $399 for the iPad 2. iSuppli estimates that the 8-gigabyte Kindle Fire has a current bill of manufacturing cost of $133.80, and with manufacturing costs Amazon $139.80 to produce.
Those costs are lower than estimates from last September, when the Kindle Fire was first unveiled. Though Amazon has been able to improve margins on its 7-inch touchscreen tablet over time, original estimates suggested the online retailer was losing as much as $50 per Kindle Fire sold, money the company presumably planned to offset with sales of Kindle books and other goods and content through its online storefront.
IHS believes the bill of materials from the Kindle Fire has fallen nearly $60 from the $191.65 it was estimated to cost when it first launched last November. iSuppli said Amazon has benefitted from "dramatic reductions in component pricing" that "provide a breather for Amazon in terms of the subsidy it initially paid."
"The (Nexus 7 and Kindle Fire) 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," said Andrew Rassweiler, senior director, teardown services for IHS. "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."
Comments
What lengths they will go just to own all your data...?
If these numbers are true, and assuming the Apple 7.85" (or is it 7"?) rumors are true, the 16GB mini-tablet will be priced at $249. Just to kill off these interlopers, and yet make a 'decent enough' profit.
After all, Apple could probably get the components even cheaper than Google or Amazon could, given the likely volumes.
But the iPod Touch would be done for, though... (unless they cut its price by $100, which is unlikely).
I still wonder if the rumored small iPad is in fact the new larger iPod Touch and perhaps is a smaller iPad in reality. Priced to kill.
I will be getting my Nexus 7 next week.
Not sure Google's ever going to need to derive profit from hardware but it makes sense to at least have some margin. I wonder how much margin their Nexus Q will give them.
Quote:
Originally Posted by SherlockHerbert
What lengths they will go just to own all your data...?
I wouldn't be naive enough to think that any other company is collecting your data, Google is just very forward about it, and in exchange, they serve you ads and you get free services. If you feel that you don't like that relationship, you can choose not to use their products. But keep in mind that certain things simply don't work if not collected from users, like real-time traffic data.
These tear-downs are bullshit. If parts and manufacturing cost $155 then the price to the end user would have to be between $300 to $450 before there was any hope of making a profit.
Quote:
Originally Posted by dagamer34
I wouldn't be naive enough to think that any other company is collecting your data, Google is just very forward about it, and in exchange, they serve you ads and you get free services. If you feel that you don't like that relationship, you can choose not to use their products. But keep in mind that certain things simply don't work if not collected from users, like real-time traffic data.
Not all companies have the same ethics. Like people, some are worse than others.
Quote:
Originally Posted by anantksundaram
But the iPod Touch would be done for, though... (unless they cut its price by $100, which is unlikely).
Not necessarily.
Apple could price the iPod touch, the iPad mini, and the iPad as follows:
iPod touch: no more 8GB, 16GB - $199, 32GB - $299, 64GB - $399
iPad mini: 8GB - $199, 16GB - $299, 32GB - $399
the new iPad: 16GB - $499, 32GB - $599, 64GB - $699
Going from the iPod touch to the iPad mini, you would get a bigger screen but less flash memory at the same price. This is just hypothetical, of course. But, Apple is likely to offer an iOS device all the way from $200 to $700 (without cellular). This will make it difficult for anybody to compete.
Note that per their usual methodology, they are only including direct labor in their 'manufacturing costs'. They are not including:
- Packaging
- Shipping
- Quality control costs
- Rework and scrap
- R&D costs
- Support costs
- Legal costs
- Licensing costs (one report says that Microsoft alone gets $15 per Android device)
- Manufacturing overhead
- Corporate overhead allocated to manufacturing
- Advertising
That puts the cost at much, much higher than $159.
On top of that, if they are selling this through any distribution channel, the distributor is going to take a portion of the retail, so Google would not receive the full $199.
When you figure all the costs they didn't include plus the discount offered to retailers, it sounds like a break-even, at best. But even if you accept their figures and ignore all the additional costs and the retailer discounts, they're only at 20% GM - which is hardly a reasonable margin for what is being sold as a premium product.
Fail.
There's not a chance in he77 that Apple would price an iPad Mini at $199. That leaves no margin after the real costs are considered (see above) - and Apple is not interested in selling a device at cost.
They don't take into account R&D, shipping, advertising, or anything not directly involved with the physical device hardware they're holding in their hands.
They're also not meant to do that.
1. Why, and
2. That's not the case.
Also,
3. Who says they're actually making a profit on the device or that they want to?
Their profit comes from your information.
I wonder. The 7.85" 4:3 display is 40% larger than the 7" 16:9 display. It's not just the 40% display size but other things associated with a significantly larger display, like the battery.
That's without considering other aspects like display quality, build quality, environmentally safe components, increased costs for Apple's Foxconn workers over whatever facility Asus/Google are using. Economy of scale is surely in Apple's favour but that does have its limits.
On top of that there is the brand name to consider. If it's 4:3 I'd think they'd call it an iPad but if they go with 16:9 or 3:2 I think they'd call it an iPod. Psychologically if it's part of the iPod line they cut more corners than they could than with an iPad line at this point.
Would people pay $299 and $349 for an 8GB and 16GB iPad that is 40% larger than the current 7" tablet displays and offered Apple a healthy profit? Does Apple really care about maintain a tablet monopoly they way they did with the PMP and opposite of their hugely profitable PC market that they would sell a $199 tablet that is 40% larger than the other 7" tablets? I'm not so sure.
From another thread that said there is no way Apple could make a $200 iPad mini who wanted to argue with me there is no profit (as if Apples buying power wouldn't be different than Google).
Quote:
Originally Posted by Alonso Perez
And you figure that how? The Touch? That's a screen with less than 1/4 the area, smaller battery, smaller case. Even Google concedes they won't make any money on the Nexus 7" (their business is advertising), and we know Amazon loses money with every Fire they sell, on the theory that they will get it back with book sales. But Amazon never had the gross margins Apple consistently creates.
I still think it'll be more like $249 or $299, but to say there is no profit is now debunked. Just saying....
Well I ordered one. The price looks like it can't be beat, and it will do Google Reader and web browsing just as well as any iPad or Windows 8 tablet.
Quote:
Originally Posted by ddawson100
I wonder how much margin their Nexus Q will give them.
Probably none whatsoever because 1) it's a stupid product by most standards and they probably won't sell many, and 2) It's made in America (Parts = $49, Manufacturing = $384) [No, these aren't actual figures, just tongue-in-cheek]. The ones they do sell, if any, will be at a loss.
Quote:
Originally Posted by dagamer34
If you feel that you don't like that relationship, you can choose not to use their products.
Do you mean like somebody who was using Safari and had their preferences set to block cookies, and then comes Google and says, FU - We do what we please, and then they track you anyway?
Quote:
Originally Posted by neiltc13
Well I ordered one. The price looks like it can't be beat, and it will do Google Reader and web browsing just as well as any iPad or Windows 8 tablet.
Waste of money.
This tablet will be a joke if and when Apple releases the rumored mini-iPad soon.
one price not listed: Android... Which is really: 'payment to Microsoft for licensing their IP'
Remember... it was theorized that Microsoft was making more per Android phone than Google was;-)
Quote:
Originally Posted by jragosta
There's not a chance in he77 that Apple would price an iPad Mini at $199. That leaves no margin after the real costs are considered (see above) - and Apple is not interested in selling a device at cost.
Again- I say this under the guise that I, too, think Apple will sell it for $249 or $299. But lets not pretend that Apple doesn't sell a device for around cost. iPod touches have consistently been for years ~$155 for parts just like this breakdown although the price was $229.. Now estimates on cost last year when they dropped the price, it dropped to around $142. And... holy crap- they sell for $199. Wow....
Apple, like anyone, likes to get a large market share hooked young and early. Why else would the shuffle still exist?