14 DAY TRIAL // We showed you the teardown of Google’s Nexus 7 quad core tablet here and now we can reveal the real manufacturing costs of the popular device.
Although both ASUS and Google bragged about making almost no profit on the Nexus 7 and subtly implied that they are probably doing it “out of love” or something, it seems that the profit marking is quite hefty.
Sales volumes are very important in any field and in the IT world it can make the difference between a profit of 3% and 33%.
Google’s Nexus 7 reportedly costs about $184 to make, when we refer to the cheapest model featuring just 8 GB of flash storage.
Sure, this is just the BOM (bill of materials) we’re referring to here, but if you add the R&D costs, Google and ASUS might in fact be in the red.
Everybody know Google will make a profit later on from selling media and advertising to the Nexus 7 owners, but the reality is that the R&D costs are finite and sales have a great potential.
Practically the R&D costs will finally be covered after a certain number of sales is achieved and right after that, ASUS and Google will be able to share that modest 8.6 % profit.
What none of the two companies are saying is the fact that on the 16 GB version, Google charges its customers $50 more, while the real cost of the NAND is likely less than a dollar.
Surprisingly, Google seems to be making a considerably 35.8 % direct profit for every Nexus 7 16 GB tablet is sells.
On the other hand, if 8 GB models sell two times better than their 16 GB brothers, leveling the profit per unit we can say that Google still makes a direct profit of about 15 % after all.
Add to these all the tens or hundreds of dollars Google charges the Nexus 7 user for all the media and software he’s buying and we can easily see that the Nexus 7 is a very profitable endeavor.