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July 11, 2012

Google to loose money on Tablet,profit by selling memory chips

Google is all set to loose money  on its much hyped tablet, if they sell it for more than $199, According to research byIHSiSuppli component teardown shows If the  tablets  manufacturing costs go beyond this price,Google will loose money.

 Many analysts say Google might be willing to take a loss to gain market share against other low-cost tablets such as the 7-in. Kindle Fire, which sells for $199. 


In general, a tablet's three biggest costs are the screen, the memory and the processor. Together, those three component might make up 60% to 70% of a tablet's cost

Google desperation to compete against iPad and Microsoft Tablets, not to mention Kindle has touched new heights. A  Research report from IHS suppli on the " Components" for making the Google Nexus Tablet  shows that Google will be selling their Tablets at  a loss.

So if  the starting price of the expected Google Nexus 7 is $199, Google could be spending $130 to $210 for materials and manufacturing costs for each device, according to a preliminary estimate from IHS iSuppli. Anything above the $199 price for materials and manufacturing costs would result in a loss for Google. 

According to AllThingsD, the low-end eight gigabyte model of the Nexus 7, which sells for $199, costs $151.75 to build.While The higher-end 16GB model, which sells for $249, costs $159.25, the difference being the cost of the memory chips inside.

Andrew Rassweiler, who leads the teardown team at IHS iSuppli, reckons that Google will break even on the 8GB model, and will turn a tidy profit on the 16GB model. “Like Apple, Google realizes it can boost its profit margin by offering more memory at a stair-step price point. It’s getting $50 more at retail for only $7.50 more in hardware cost, which sends $42.50 per unit straight to the bottom line.”

Google Tablet Ambitions Might be costly, but a risk worth taking. Google's foray into social web has failed, and positioning itself  as a  a " manufacturing" company that can compete against Giants like Microsoft and Apple will not be easy.