When Google announced their new ASUS made Nexus 7 tablet at Google IO for the low price of just $199 there was a roar of cheers and clapping. Offering such a high quality product with top of the line specs at that price surely isn’t easy. After initial reports suggested Google would make zero profit on the tablet we now have additional details.

Now this doesn’t really matter for the individual consumer. All they need to know is the tablet is awesome, is $199, and a major bang for their buck. After a teardown by TechInsights the tablet’s estimated production cost sits at around $184 per tablet. Roughly a $15 profit per device for Google/ASUS. It looks like that “virtually no profit margin” statement might not have been completely accurate.

When you add in all the additional R&D to hit that low price point, logistics, and many other factors that $15 probably gets gobbled up pretty quick. When Google said they weren’t making any profit margin on the tablet — it was probably true. That is only the 8GB model however. The 16GB model is $249 when that additional 8GB of storage costs under $10 to produce, making the 16GB version profitable to the tune of around $55. With the increase to the Play Store they are hoping movies, magazines, books, and music are what drive sales and profit margins. This is the same approach Amazon took with the Kindle Fire, but the Nexus 7 blows it away.

It looks like sales from the Play Store and the 16GB version will offset any lack of profit from the lower alternative, and either way this was a great move by Google. Who’s buying?

[device id=2841]

[via Fudzilla]

  • Dustin Wen

    Preordered and waiting!

  • kennedy myril

    I’m just waiting for amazon to stock this so i can get it in the caribbean… I dont care if it costs about $20 US more.. it’s worth having nexus devices. Will probably get Acer’s new 7″ as well though…

  • that’s just the production. you’re missing advertisement, transport and other junk that also costs money

    • I mentioned R&D and Logistics in the post, but you have a good point.

      • WestIndiesKING

        “virtually no profit margin” Key word virtually

  • Brian Simmons

    Pulled the trigger last night, and will be anxiously watching the news for shipping dates next week!

  • Zoid

    No SD card! Looks like we are going backwards here. I’ll wait.

    • No SD card is a new trend. SD Cards are like going backwards. Having said that I would have liked the SD card as well but I can live without an SD card as well.

  • Leif Sikorski

    + the 25$ bonus for the play store google has to pay as well

    • Veejae

      think you forgot the UK price is equal to over $300 Do I hear RIP OFF BRITAIN yet again. I’d love one but wouldn’t buy one out of principle!!

      • The UK price includes tax. I paid $286 for mine after tax and shipping

      • OSagnostic

        16GB cost $250 that is £161.5, plus vat is £193.8 . Given that there will be fluctuations in exchange rate I think £199 is a very fair price.

  • this is going to be the new trend… making next to nothing or even losing money on the hardware; all because in the long run Google just wants more people using their services. They need people to switch from apple and they can only do that by offering a great deal. Since android is open source, they dont make money inherently off android OS, google (just like amazon) makes the big $$$ in the play store and promoting apps, music, movies, etc. and its in their best interest to make android available to the masses

    Also the more people who purchase android devices, the more likely they are to use all the google services like gmail, google drive, calendar, etc. and are likely to be using these services for years to come… i wont think about switching to microsoft or iOS because at this point, all my stuff is on google servers and I bought tons of apps that I would rather not buy again! I’m locked in to android, and so many people wont ever leave iOS for this exact reason, because iOS cornered so much of the smartphone and tablet market early on.

  • masterpfa

    Already pre-ordered one and will be getting one or two more for the family.
    The price point and features make this, for me, a no brainer. I held off from getting the Galaxy Tab 2 7.0 as this device was on the horizon, so glad I waited.