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.