If the starting price of the expected Google Nexus 7 is US$199, Google could be spending US$130 to US$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. 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.
The Nexus 7 hasn't even been announced, although Google may do so at the start of its Google I/O conference Wednesday. IHS has not seen the Nexus 7 device, but derived its estimate by comparing reported components of the Nexus 7 with two other tablets on the market that it has examined in detail, at the request of Computerworld US.
IHS analyst Andrew Rassweiler said the Samsung Galaxy Tab 7.7, which IHS has examined and which has a price tag of $499.99 with Verizon Wireless, cost nearly $300 in materials and manufacturing. By contrast, the low-price 7-in. tablet called the Aino Novo 7 Paladin (selling on Amazon for $114.99) cost about $100 for materials and manufacturing, he said.
Given the price tags for those two tablets, Rassweiler said, "I could see a potential Nexus 7, 7-in. tablet bill of materials [including manufacturing costs] being anywhere from $130 to $210." He said a closer look with more components detailed, or an actual teardown of the device, would narrow the cost range.
Rassweiler noted that the Galaxy Tab 7.7 has an LTE module, and if the Nexus 7 does not, that would reduce its cost by at least $40. Also, the Galaxy Tab has a Super Amoled screen, which costs $120 alone. By contrast, the Nexus 7 is expected to have a different, less-expensive display technology. Rassweiler set an estimated $70 to $80 cost for its display.
The Nexus 7's 8GB of NAND flash storage would cost around $10, compared with $18 for the Tab's 16GB, Rassweiler said. (The Nexus 7 is reportedly also coming in a 16GB version for $249.)
In general, a tablet's three biggest costs are the screen, the memory and the processor. Together, those three component might make up 60 percent to 70 percent of a tablet's costs, said Jack Gold, an analyst at J. Gold Associates. A tablet's processor could cost $25 to $50, he said.
The Nexus 7 is also expected to have 1GB of RAM, but Gold said "that's not enough" for good performance, even with a high-end Nvidia Tegra 3 processor.
Nvidia has said its Kai reference design reduces the need for lots of memory to provide adequate performance, and some observers have said the Nexus 7 will have the Kai design.
Gold said there are plenty of examples of low-priced tablets on the market, but questioned whether Google can really achieve great sales with a low-cost, low-priced tablet.