July 12, 2012

Google charges $50 for $7.50 worth of storage in the Nexus 7


Research firm IHS iSuppli have carried out a teardown of Google’s Nexus 7 Android tablet and estimated that the 8GB model — retailing for $199 — costs almost $160 to build. The 16GB model, which retails for $249, only costs an extra $7.50 to build.

The teardown also reveals how Google has taken a leaf out of Apple’s book and realized that there’s money to be made by charging a premium for extra storage.

As a rule, Android devices have a micro-SD card slot that allows additional storage to be added. This slot is absent on the Nexus 7 and the teardown uncovers why Google decided to prevent users adding more storage at will: it’s all down to profit.

In other words, if you want more storage, you end up paying an eye-watering $50 for $7.50 worth of storage. Compare this to a 32GB micro-SD card, which costs less than $20, and Google must be laughing. 

Apple uses the same strategy with the iPad, which comes in 16GB, 32GB and 64GB models, with $100 price jump between each. However, it costs Apple less than $20 to bump the storage from 16GB to 32GB and about $35 to bump it from 32GB to 64GB.

Just as Apple does with the iPad, Google has adopted Apple’s strategy of charging a premium for higher storage capacities, and forces people’s hands by not offering a cheap storage expansion option via micro SD card.

This one tactic adds $42.50 to Google’s bottom line on each sale of the high-end Nexus 7.

The teardown reveals that the most expensive component of the Nexus 7 is the display and touchscreen, which cost $38 and $24 respectively. This is a significant saving compared to the display and touchscreen components that Apple uses in the iPad 3, which cost $87 and $40 respectively.

The teardown also highlights some of the major differences between Google Nexus 7 and Amazon’s Kindle Fire. The inclusion of the far superior quad-core Nvidia Tegra processor compared to the OMAP 4430 dual-core chip found in the Kindle Fire adds $7.50 to the bill of materials.

Additional feature such as a higher-resolution display using in-plane switching (IPS) technology, a camera and an NFC chip come together to give the Nexus 7 a bill of materials that’s $18 higher than Amazon’s Android tablet.

iSuppli’s teardown assessments only take into account the hardware and manufacturing costs, and ignore other expenses such as software, licensing, royalties or other expenditures.

An earlier teardown of the tablet by repair specialists iFixit found that the way Google designed the Nexus 7 made it far easier to take apart and repair than Apple’s iPad 3.

Image source: IHS iSuppli, iFixit.




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