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Nexus 7 (c) Google

Google pays the price of squaring up to Amazon

Posted By TelecomTV One , 12 July 2012 | 1 Comments | (0)
Tags: Google Android Amazon Kindle tablet nexus smartphone apps Games Apple Devices

The costs of manufacturing Google’s new Nexus 7 tablet are revealed, whilst Amazon seeks to strengthen its tablet ecosystem with improvements to its game service. Guy Daniels reports.

When Google announced its new Nexus 7 tablet, its low cost came as something of a surprise. With so much included in the Asus-made device, surely there can’t be much profit margin?


According to the preliminary findings of a detailed tear-down analysis from research firm IHS, the Google tablet carries a bill of materials of $512 per unit. When manufacturing expenses are added, the cost increases to $159. Considering that the retail price is $199, that just leaves $40 gross margin.


It’s apparently better for the 16GB model, with parts and manufacturing coming to $167 against a retail price of $249 – an $82 margin.


The estimated costs from IHS account only for hardware and manufacturing costs and do not include additional expenses such as software, licensing, royalties or other expenditures. Nor do they include marketing costs, all of which Google said it was going to cover.


Andrew Rassweiler, senior director of teardown services for IHS, confirmed that the Nexus 7 is more of a competitor to Amazon’s Kindle Fire than Apple’s iPad:


“The two platforms are similar in many regards, including the use of the 7-inch display, the eschewing of 4G wireless connections in favour of Wi-Fi, support for virtually identical battery lives and the same pricing for the entry-level models. However, 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.”


The 8GB Nexus 7 retails for the same price as the identically sized 8GB Kindle Fire, although IHS estimates that the total cost for the bill of materials and manufacturing for the Kindle is just $140 – a $19 improvement over the Nexus.

However, when the Fire was first introduced last November, its bill of materials was calculated to be $58 higher, due to higher component costs. The biggest single saving appears to be the processor, which IHS estimates costs $21 in the Nexus against $13 in the Nexus.


Google’s tablet uses a quad-core Tegra 3 processor from Nvidia, compared to the Kindle Fire’s OMAP 4430 dual-core processor from Texas Instruments. The Nexus 7 also has a higher-resolution display (at $3 more) and includes a camera (for the princely sum of $2.50) and NFC capability.


Amazon is expected to fight back with new Kindle models later this year. There’s even frenzied media speculation that the online retailer could be introducing a smartphone, or a Galaxy Tab-like hybrid device (please, let’s not use the term phablet).


For the time being though, Amazon has set its sights on Apple, with the launch of its GameCircle service. Described as “a new gaming experience for Kindle Fire”, GameCircle is more than a little similar to Apple’s Game Centre.


Amazon is selling this concept to developers as “a new set of services designed to make it easier for you to create more engaging gaming experiences and grow your business on Kindle Fire”. Paul Ryder, Vice President of Apps, Games, and Services at Amazon, explained that:


“Our goal is to give developers great tools to quickly and easily reach new customers and keep them engaged. GameCircle gives developers the right tools to build an immersive, more entertaining experience on Kindle Fire, which will ultimately help developers grow their business.”


The GameCircle APIs include ‘achievements’, which feature in-game messages and allow players to track all earned trophies and awards without leaving the gaming experience, whilst ‘leaderboards’ provide an in-game view of score comparison information and percentile ranking. All very Game Centre.


But the third API is what really differentiates this from Apple’s offering. The ‘Sync’ feature automatically saves a player’s in-game progress to the cloud and allows them to pick-up exactly where they left off when restoring a deleted game or switching devices. Very useful when you switch from your Kindle Fire to your brand new Amazon smartphone perhaps…?


Now, if Amazon can just sort out its content licensing issues and get the Kindle Fire into markets outside of the US. Then the platform wars will take a new turn: Android, Apple and Amazon as the top three? After all, they all have the best content and developer ecosystems.

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(1) 15 July 2012 17:22:47 by D. Brent Harsh

Scanning this article, it's either a very poor job of editing, or the facts are really confused. How does a BOM cost of $512 become $159 leaving a $40 gross profit margin (paragraph 2)? Comparing processors, $21 in the Nexus versus $13 in the Nexus... which is which? Wrong numbers, wrong names... can't trust anything in this one I'd say...