The entry-level 8-Gigabyte (GByte) version of Google’s new Nexus 7 media tablet carries a bill of materials (BOM) of $151.75, according to preliminary findings from the IHS iSuppli Teardown Analysis Service. When manufacturing expenses are added, the cost increases to $159.25. The high-end model with 16GBytes of NAND flash memory has a $159.25 BOM, for a total cost of $166.75.

Table 1 presents the preliminary results of the dissection of the Nexus 7, along with a comparison toAmazon’s Kindle Fire. Note that these teardown assessments are preliminary in nature, account only for hardware and manufacturing costs and do not include additional expenses such as software, licensing, royalties or other expenditures.

When additional costs are considered, IHS estimates that Google will at least break even on sales of the 8GByte model, priced at $199 — and will make a modest profit on the 16Gbyte version,which is priced at $249.

Like Apple,Google has realized it can boost margins by offering more memory at amore profitable price point. Google is charging $50 more at retail for only $7.50 in additional memory cost at the BOM level. This adds $42.50 to Google’s bottom line on each sale of the high-end model.

"Google’s Nexus 7 representsless of an attempt to compete with Apple Inc.'s market-leadingiPad, and more of a bid to battle with Amazon’s Kindle Fire,"said Andrew Rassweiler, senior director, teardown services for IHS. "The two platforms are similar in many regards, including the use of the7-inch display, the eschewing of 4G wireless connections in favor of Wi-Fi,support for virtually identical battery lives and the same pricingfor 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 Nexus 7 distinguishes itself from the Kindle Fire with its higher-resolution display using in-plane switching (IPS) technology. Google’s tablet also employs aquad-core Tegra 3 processor from Nvidia Corp., compared to the Kindle Fire’s OMAP 4430 dual-core processor from Texas Instruments Inc. The Nexus 7 also includes a camera and sports a near-field communications (NFC) chip for wireless commerce - both features absent on the Kindle Fire.

These additional features give the 8GByte Nexus7 a BOM that is $18 higher than the current cost for the Kindle Fire. IHS now estimates the BOM of the Kindle Firehas fallen to$133.80, down from $191.65 at its introduction in November,due to dramatic reductions in component pricing. These considerable cost reductions provide a breather for Amazon in terms of the subsidyitinitially paid to penetrate the market.

The component suppliers in the Nexus 7 offered few big surprise. However, one novel part is the combination gyroscope/accelerometer from InvenSense Inc.

"Although we have seen a lot of InvenSense gyroscopes, we have seen only one other combo device - a partfrom STMicroelectronics in theSamsungGalaxy SIII. Furthermore, the InvenSense part integrates onboard processing, a newer feature for MEMS sensors," indicated Rassweiler.