Google's Nexus 7 might turn a small profit after all, according to a third-party estimate by IHS iSuppli.
For the 8 GB Nexus 7, the bill of materials totals $151.75, or $159.25 with manufacturing costs included, iSuppli said. The bill of materials for the 16 GB model is $159.25, or $166.75 with manufacturing.
Factor in additional costs such as distribution, marketing and tech support, and iSuppli estimates that Google “will at least break even” on the 8 GB Nexus 7, priced at $199, and will turn a “modest profit” on the $249 version with 16 GB of storage.
Estimates aside, Google Senior Vice President of Mobile Andy Rubin has already said that the Nexus 7 won't rake in the profits. “When it gets sold through the Play store, there’s no margin,” Rubin told All Things Digital last month. “It just basically gets (sold) through.”
But there's a bit more room for profit in the 16 GB model, which is priced $50 higher the base model even though the storage only costs $8 more. That would explain why retailers such as Gamestop and Staples are only selling the 16 GB version. At the moment, the Google Play store is the only place to get the 8 GB version.
The bill of materials estimate from iSuppli is another example how cutthroat the low-end of the tablet market can be. When the Kindle Fire launched last year, iSuppli estimated a total cost of $209.63, which meant Amazon was losing about $10 on every tablet sold.
It's worth keeping all this in mind, in light of rumors that Apple will enter the small tablet market later this year. Apple's supply chain management is good enough that the company may be able to beat Google on the cost of materials, but I'm skeptical of speculation that Apple will release a 7.8-inch tablet for $200. If Apple wants to profit from the hardware, a $250 to $300 tablet seems more likely.