By 
The most appealing aspect of Google’s Nexus 7 tablet is its pricing. At $199, many in the industry have been wondering just how much Google is paying to build and as an extension how wide a profit margin does it provide. A new teardown by IHS iSuppli attempted to put a price on each component found within the N7, and the result was a slate that cost $151.75 per unit for the 8GB model. Add in overhead for marketing and distribution and it’s fair to say that Google is indeed breaking even at best, if not taking a loss when it comes to the $200 price point.
However, Google’s ace is the 16GB model, which is priced at $249 but only costs about $7.50 extra to produce. The added cost is directly associated with the device’s larger memory module. The result is pure profit at that point, according to IHS iSuppli’s report. Interestingly, the Nexus 7 only costs about $18 more to manufacture than Amazon’s Kindle Fire, with added cost coming in the form of a camera sensor, Tegra 3 processor, and higher resolution display.
But Google’s goal with the Nexus 7, as is Amazon’s with the Kindle Fire, was never to churn out profit on the hardware alone. The low-cost slates look to bring in additional revenues via the sale of content through Google Play and Amazon’s suite of services, respectively. So far the strategy has worked well for Amazon, but the jury is still out on Google’s experiment.
[via AllThingsD]
Hmm, guess they didn’t find any stolen underpants inside the tablet.
1. Steal underpants
2. ???
3. Profit
LULZ!!!
Yeah it’s probably hard to get an accurate number for the cost without taking into account the volumes of parts ordered. Custom quotes are pretty common.
Google has me sold on the nexus 7 :)
I bought a 16gb model. As much free stuff as Google gives me, I have no problems with them taking a little profit. /fanboy
I have no problem with them making profit. The point of this article, however, is that they are not making profit at all.
Except that he states that in the case of the 16gb model, they do make a profit.
“However, Google’s ace is the 16GB model, which is priced at $249 but only costs about $7.50 extra to produce. The added cost is directly associated with the device’s larger memory module. The result is pure profit at that point, according to IHS iSuppli’s report. “
That’s not a statement of profit. That’s merely a statement of less cost. Very different. I’ll quote myself from a different comment here:
”
There’s also R&D, they lose 70% of the $25 play store credit, product support, Asus’s profit (they don’t work for free), the profit made by retailers not Google like Gamestop and Best Buy, and other fees built into the price. It’s pretty guaranteed they are losing money on the 8GB at the very least. Possibly 16Gb as well.” There’s also marketing and distribution costs.
The reason retailers are only selling the 16Gb is probably because that is the only one that has any space for the retailers cut at all, so the only place google may be making any money of note is ONLY 16Gb through the play store, assuming that profit isn’t eaten up by all the other factors. People forget, hardware isn’t the only cost, not by a very long shot.
Alright, fair enough. I think you went too analytic, but I’m okay with them having less cost on my purchase.
Eh, the real world requires analytic minds. Nothing is ever as simple as it seems.
I like you. You’re okay in my book.
God I really hope they can keep the agressive pricing going with a 9″ or 10″ model. For true pocketability I have a phone but I love my TF for consuming HD media, surfing the web and taking notes. I just think the 7 is just not going to do it. Hoepfully they have a nicely kitted 10″ at $350 when my asus finally dies (or stops getting updates), which might happen by EOY (not knocking the TF, I was a consultant so it was abused during heavy travel schedules).
These are parts cost not manufacturing costs. The two are very different.
“Add in overhead for marketing and distribution” And cost of actually putting the device together are 0 dollar, do they use slaves or something (even slaves cost money)?
I don’t really care how much profit they’re making on each unit. It’s no where near what Apple is making on the iPod, more in line with what Amazon is doing with the Fire. I just want them to send me my pre-order.
SHIP IT PLEEEAAASSEEEE
lol. i live in london. the google warehouse is in dublin. it shouldnt take that long to get delivered.
I’m waiting! I would think those of us who preordered from Google might get some preferential treatment on delivery.
That’s the hope. Word is from several employees at various retailers the street date to hit store shelves is 7/12. That’s tomorrow. I preordered back on 6/28 and I’ve yet to see any Google Wallet activity past “Google has received your order.” Not really all that mad, I know I’m getting it. It would just be nice to have the device in hand on or before it hits retail shelves. That IS kinda the idea behind preordering.
6/27 here. Same boat. I’d imagine the first day or couple days is going to be the first shipment. But then, we don’t know how many they sold, so they could be absolutely swamped. Not to mention, what if they want to clear the search problems with Apple first? That could be another week’s delay. :/
I’m still a little salty that the Play store charged me $13 for shipping, when Staples, Best Buy, and countless others are doing preorders with free shipping. If you tell me that other people get their hands on the tablet before me when I ordered on announce day straight from Google…..that would be a pretty big slap in the face.
The question I have, that no one seems to be asking, is what’s Asus’ cut? OK, we all know that Google doesn’t want profit on the hardware, they want the search and sales revenues through the tablet…. but Asus is a hardware company. They don’t build tablets for free. So what is their deal with Google on this? A % of all revenue generated through Asus Nexus tablets? That’s an interesting proposition, and one I am curious to see replicated.
If Google is going to track revenue by device, I wonder how much money they’ve made from me over the past 5 years….. not that I begrudge them a penny of it, I just want to know what my attention is worth individually.
You are almost certainly correct, Asus has their cut. They probably are the ones selling them to Google, as well as direct to other stores like Gamestop, Staples, and whoever else is selling them (and those people take their cut as well).
still have the $25 dollar voucher included
I wish they could have added MHL. Other than that, this tablet is very nice. If you are going to buy one, don’t get the 8GB version.
DLNA my friend……
I write Android apps, sometimes I want to demo an app for a client as a screencast. This is why I want MHL.
At least it isn’t a 500% profit margin like Apple make (or something as ridiculous) on most of their products. I’m ok with giving Google a little extra profit in my 16GB pre order. Just hope they get deals signed with whoever needs signing deals with to get the other services to the UK market so the Nexus devices sell even better…… Oh and so I can use the music service :-P
”
Add in overhead for marketing and distribution and it’s fair to say that Google is indeed breaking even at best, if not taking a loss when it comes to the $200 price point.”
Thank you. Way to many people seem to feel like that happens magically. There’s also R&D, they lose 70% of the $25 play store credit, product support, Asus’s profit (they don’t work for free), the profit made by retailers not Google like Gamestop and Best Buy, and other fees built into the price. It’s pretty guaranteed they are losing money on the 8GB at the very least. Possibly 16Gb as well.
plus labor its simple as that… you have to pay the people to build it too you cant just buy the parts
So excited… for their 10 inch version.
tell me what do u think about this story tinyurl.com/phandroid-css
That explains why they wouldn’t put in a microSD slot.
not really. i have a spare zte device in the house. WHICH i bought for £15 ($23). it has a micro usb slot