Last fall, when Amazon launched the Kindle Fire, they probably had to take a little loss, as the components alone cost about $190 out of the $199 retail price they were selling it for. Add to that the costs of marketing, distribution, and so on.
It seems that the Nexus 7, Google’s and Asus’ endeavor, may be a little more profitable, as the materials are estimated to cost between $130 and $210 for the two versions ($199 and $249), according to a preliminary estimate by IHS iSuppli.
At the request of ComputerWorld, IHS iSuppli analyzed two tablets that are already on the market, the Galaxy Tab 7.7, which costs $499 (with materials costing almost $300) and the Novo 7 Paladin which is priced at $115 on Amazon (includes components of around $100).
According to iSuppli, the Galaxy Tab 7.7 has an LTE module that goes for around $40, and also a Super AMOLED display, which costs $120 alone. By contrast, the Nexus 7 tablet should use a cheaper IPS display, that goes for around $70-$80. The 8GB storage module would cost around $10 for the Nexus 7.
In general, the three most expensive components in a tablet are the display, the processor, and the memory. They could make up 60%-70% of the tablet’s total cost, says Jack Gold, an analyst at J. Gold Associates. The processor alone could cost anywhere from $25 to $50, although I assume the Tegra 3 will be on the lower end of that scale, especially for their Kai design, which this tablet will probably use.
Some people are suggesting that Google is going to subsidize the Nexus 7 tablet, like Amazon did, but unless Google is willing to do it with everyone’s tablets, I very much doubt that’s going to happen. The other manufacturers, like Samsung, might not be very thrilled about Google’s move to make such a cheap tablet with Asus, but they would be mistaken to think like that. As long as the $200 tablet is profitable enough, and Google manages to sell millions of units, its success should be good for the whole ecosystem.
First, all manufacturers would benefit from having more apps for their own tablets in the future. Second, since the $500 Android tablets haven’t been truly successful so far, maybe these inexpensive tablets will be. Again, Google’s strategy will only work if the Nexus 7 is profitable enough, and, according to these materials numbers, that seems to be the case.