Shortly after Amazon unveiled its Kindle Fire tablet last year, IHS iSuppli's hardware teardown suggested that Amazon was selling the hardware at a slight loss in order to hit the $199 price point. What of Google's freshly introduced Nexus 7, which also costs $199 but features faster hardware and a better display?
IHS iSuppli's latest teardown report is in, and it says the 8GB Nexus 7 costs $151.75 in parts. The market research firm estimates additional manufacturing costs of $7.50 per device, which brings up the total to $159.25. The 16GB version of the device purportedly costs $166.75 in all. "When additional costs are considered," IHS iSuppli adds,"Google will at least break even on sales of the 8GByte model, priced at $199—and will make a modest profit on the 16Gbyte version, which is priced at $249."
Of course, Amazon's costs have gone down over time, too. In October 2011, IHS iSuppli estimated a total production cost (including materials and labor) of $209.63 for the Kindle Fire. Now, thanks to "dramatic reductions in component pricing," IHS iSuppli says each Kindle Fire only costs $139.80 to produce. That tells us Amazon must be making at least a small profit on Kindle Fire sales.
Either way, this teardown report suggests $199 tablets still aren't big moneymakers. For companies like Google and Amazon, the appeal may be more in cultivating market share—and boosting sales of digital content—than in raking in big piles of cash... at least for the time being.
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