Google tablet costs $152 to build, analysis shows
SAN FRANCISCO (MarketWatch) -- The cost of building a basic version of
The analysis, released Wednesday by IHS, suggests Google's (GOOG) cost for its new tablets, priced at $199 each, is about $18 higher than the estimated bill-of-materials of the rival Kindle Fire tablet from
But the Google tablet's cost also appears to be lower than the $191.65 estimated build cost for Amazon's tablet when it first launched its $199 tablet in November of last year.
Citing "dramatic reductions in component pricing," IHS says Amazon's cost to build a Kindle Fire has dropped to $133.80.
Google shares traded down 1.8% to close at $571.19, while Amazon was off 0.5%, closing at $218.37.
According to the IHS analysis, an entry-level 8-gigabyte Nexus 7 has a total bill of materials of $151.75. A higher-end 16-gigabyte model has a total cost of $159.25, the report said.
"That's a slightly better tear-down price than I was expecting," BGC Partners Colin Gillis, who had estimated a cost of more than $160 each, said in an interview. "No one wants to lose money so you want to build them to at least break even."
The Nexus 7 is seen as a major Google initiative in the tablet market, where it is competing with the iPad from
"This is the reason why Google is stepping in," Gillis said. "If you want it done right, do it yourself."
Andrew Rassweiler, an IHS senior director, said Google's tablet is also clearly aimed at Amazon.com, which shook up the tablet market last year by offering its own version at $199.
"Google's Nexus 7 represents less of an attempt to compete with Apple Inc.'s market-leading iPad, and more of a bid to battle with Amazon's Kindle Fire," he said in a statement.
While the two are "similar in many regards," he added, 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."