Google’s Nexus 7 teardown shows it nets a profit — but a small one

July 13, 2012

With Google’s Nexus 7 now shipping for early buyers, it’s time to see how well the Google-branded tablet will do in the larger marketplace. Reviews have been glowing, with predictions that the tablet will all but wipe out the first-generation Kindle Fire, given that both tablets share a $199 price point.

But how much could Google be making on that price, particularly since it includes a better screen than the Kindle Fire and a camera to boot?

The teardown gurus over at IHS iSuppli told All Things Digital that the 8GB version of the tablet costs Google $151.75 to make, while the 16 GB costs $159.25. Those are thinner margins than Amazon sees with its Kindle Fire — but just barely. The same group estimated in November that the Kindle Fire actually loses Amazon about $3 per tablet, but component prices have fallen to the point where Amazon can now produce the tablet for $133.80, Reg Hardware reported.

Of course, making money on the hardware isn’t the plan for Google or Amazon. For them it’s all about the content. If Google can expand Google Play and plug its users into their store to buy books, movies, games and music, it can make the money it needs by keeping customers locked into the Google ecosystem.

But while reviewers think the Nexus 7 destroys the Fire based on its specs, they’re not so sure that Google can beat Amazon’s enormous retail operation. It’s well and good to offer movie rentals and fun apps, but Amazon’s got just about everything you could possibly want at the fingertips of every Kindle Fire owner — and it’s not afraid to use that leverage. It will be a battle to watch, particularly if Apple throws its hat into the ring with a smaller iPad.

Right now, demand for the Nexus 7 is high, Computerworld reported, with retailers such as GameStop, Adorama and Staples already saying they’ve sold out of the tablet and are waiting on additional inventory.

A GameStop spokeswoman told Computerworld that the company is taking pre-orders for the next round of shipments, expected by August 7.

Related stories:

Nexus 7: Review Roundup

Bloomberg: Google Nexus 7 obliterates every reason for buying the Kindle

Google’s Nexus 7 and Jelly Bean OS: made for each other

Hayley Tsukayama covers consumer technology for The Washington Post.
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