July 16, 2012, 4:20 PM — A teardown of the Nexus 7 tablet reveals Google is likely to break even on the $199, 8 GB version of its tablet while earning a modest profit on the 16 GB version, priced at $249.
IHS iSuppli said the 8 GB version of the Nexus 7 has a bill of materials (BOM) and manufacturing total cost of $159.25. The 16 GB version total is $166.75.
Google launched its Nexus 7 tablet at its Google I/O conference in San Francisco. (Image: Google)
"Google will at least break even on the 8 GB model ... and will make a modest profit on the 16 GB version," IHS said in a statement last week.
With the 16 GB version, Google is charging $50 more at retail by adding only $7.50 more in memory cost, adding $42.50 to Google's bottom line, IHS said.
IHS said its teardown totals are preliminary and don't include software, licenses and royalties.
IHS analyst Andrew Rassweiler said the Nexus 7 competes more with Amazon's Kindle Fire, also a 7-in. tablet that sells for $199, than the $499, 9.7-in. iPad.
Both the Fire and the Nexus 7 have the same size display and save costs by providing Wi-Fi only, and not including 4G or 3G service, Rassweiler said. Other than having nearly the same amount of battery life and the same price, Rassweiler said the Nexus 7 has superior specifications that "may make it more desirable to consumers."
Among those specs is the Nexus 7's higher resolution display with in-plane switching technology and a quad-core Tegra 3 processor from Nvidia, compared with the Fire's OMAP 4430 dual-core processor from Texas Instruments. Also, Nexus 7 comes with a camera and NFC (near field communications) chip, both missing from the Fire.
Such added features make the 8 GB Nexus 7's materials cost $18 higher than the Kindle Fire's materials cost of $133.80, which has fallen dramatically due to reductions in component prices. At the time the Fire first launched last year, IHS said its BOM was $191.65, meaning that Amazon was paying a subsidy on the device when other costs were added in, Rassweiler noted.
IHS also found a tablet novelty in the Nexus 7 components -- a combination of a gyroscope and an accelerometer from InvenSense. The Samsung Galaxy S IIIsmartphone also has a combination device built by STMicroelectronics, IHS said.