We recently wrote that the Android 4.1 based Nexus 7 tablet that is priced at $199, costs about $184 to make staying true to the company’s promise of selling the device on limited profits. But that seems to have been an overestimate, as a new teardown has revealed that the tablet actually costs about $152 to make. AllThingsD apparently spoke with IHS iSuppli about the Nexus 7 and learnt that the device takes $151.75 to make which is about $32 lesser than the previous estimate. This is a big amount considering that the tablet is sold for $199. However if we take the manufacturing cost as $152, it doesn’t include advertising, research and development, labor etc. So we cannot exactly nullify Google’s claims. The $249 version of the tablet however is a straight out profit for the company, as it is believed to cost $158.75 with only the addition of an extra 8GB memory chip which is believed to cost around $7.5.
iSuppli believes that the insides of the Nexus 7 looks fairly similar to the Kindle Fire with some key components changed (CPU, NFC etc). What’s important to note here is that iSuppli actually opened the device and calculated costs of every single component. Last week’s estimate given out by UBM TechInsights did not involve a thorough teardown of the device.
This comprehensive teardown reveals how manufacturers almost double the price of devices by merely increasing the storage which doesn’t even cost much to begin with. That’s how Apple does it, that’s how most manufacturers do it. So it is a level playing field there as the manufacturers have to make profits off the device, that’s the whole point basically. Google is following Amazon’s strategy of selling the tablet at cost to lure in buyers. While the not so regular user might easily pick up the 8GB version of the Nexus 7, the extensive users will easily pick the $249 version of the tablet.