Google will break even on an 8GB Nexus 7 and make a profit on the 16GB
The cost of materials for an 8GB version of the Google Nexus 7 is estimated to be $151.75 (£98.19), according to a teardown by IHS. This is just $18 (£11.65) more than the current cost of components for its rival, the Kindle Fire.
The Amazon tablet costs the company $139.80 (£90.49) in components, a price which has come down substantially compared with the $191.65 (£124) materials cost when it was first released last November. Google is starting in a better position than Amazon did: even the 16GB Nexus 7 is cheaper than the highest historic cost of anAmazon tablet.costing just $159.25 (£103) in materials.
Even when manufacturing costs are taken into account, IHS believes that Google will at least break even with the 8GB model and make a modest profit on the 16GB edition. They will cost £159 and £199 in the UK respectively.
“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 boasts a higher resolution display, a quad-core processor, NFC support and has a camera, all of which give it an edge over the less powerful Kindle Fire.
HIS did note that “dramatic decreases in component pricing” had benefited Amazon, who initially sold the Kindle Fire at a loss in order to enter the market and recoup the costs through the sale of content. It was reported that the cost of materials and manufacturing expenses for every unit was $209.63 (£135.70), more than the $199 (£128.79)it cost to buy.
This strategy appears to have worked, as the tablet has sold in its millions and Amazon has reported strong digital content sales.
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