IHS Breakdown Report Reveals Nexus 7 Has $18 Higher Bill of Materials than Kindle Fire

Google’s entry-level 8GB Nexus 7 tablet has a $151.75 bill of materials (BOM), $18 higher than that of the Kindle Fire, according to a preliminary report by IHS’s Teardown Analysis Service. The BOM -- including design, components and cost -- goes up to $159.25 with the addition of manufacturing expenses, IHS said. The high-end 16GB model has a BOM of $159.25 and total cost of $166.75 with manufacturing added, IHS said.

Teardown assessments account only for hardware and manufacturing costs and don’t include additional expenses such as software, licensing, royalties or other expenditures, IHS said. When additional costs are considered, the IHS service estimates Google will “at least break even” on sales of the 8GB model ($199) and will make a “modest profit” on the 16GB version ($249).

"Like Apple, Google has realized it can boost margins by offering more memory at a more profitable price point,” IHS said, with Google charging $50 more at retail for $7.50 in additional memory cost at the BOM level. The result is $42.50 to Google’s bottom line on each sale of the high-end model, it said. Nexus 7 is “less of an attempt” to compete with iPad and more of a bid to take on Kindle Fire, said Andrew Rassweiler, senior director-teardown services for IHS. Nexus 7 and the Kindle Fire are similar in battery life, pricing on entry level models and size, with 7-inch displays, and both offer Wi-Fi connectivity and not a wireless carrier version, Rassweiler noted. But Nexus 7 has “superior specifications to the Kindle Fire, giving it a more attractive feature set that may make it more desirable to consumers,” he said.

Those specs include a higher resolution display using in-plane switching technology, an Nvidia quad-core Tegra 3 processor versus Kindle Fire’s OMAP dual-core processor from Texas Instruments, an integrated camera and a near-field communications chip for wireless commerce, IHS said. Meanwhile, IHS iSuppli now estimates the BOM of the Kindle Fire has fallen to $133.80, from $191.65 when it launched in November, due to “dramatic reductions in component pricing.” The cost reductions provide a “breather” for Amazon, which paid a hefty subsidy to seed the market when the tablet first hit stores.

Most of the components in the Nexus were usual suspects, IHS said, but a combination gyroscope/accelerometer from InvenSense Inc. stood out. The only other combination device the teardown group had seen prior to the Nexus 7 was a part from STMicroelectronics found in the Samsung Galaxy SIII, it said. The InvenSense part integrates onboard processing, a newer feature for MEMS sensors, IHS said.