Google's first tablet, the Jelly Bean-sporting Nexus 7, seems such a jaw-dropping bargain that many people have been wondering how the search behemoth can flog it for £159 without losing any money. The answer? It's not.
Parts alone add up to about £118 for the 8GB model, according to a teardown by UBM TechInsights that's been priced up by Fudzilla. That leaves about £40 to play with. After Google has paid for support, marketing, VAT (over £25) and the delightful £15 Google Play voucher included in the pack, that's one hell of a loss when pre-sales have been "big", according to Android's director of product management, Hugo Barra, who refused to divulge any figures.
The 16GB model, which sells at £199, should produce a small profit, because the extra flash memory hardly adds anything at all to the bill from manufacturer Asus. But because there's no expandable memory slot, that extra storage could be a wise investment.
Andy Rubin, senior vice president at Google, has already stated the company has no interest in profiting from sales of the tablet, which means the goal is to grab iPad refuseniks with the minuscule price, and make a profit in the long term by renting movies and selling apps and music through the Google Play market, as well as the rest of Google's services.
The Nexus 7 was announced in late June with a bevy of exciting features, such as the new Jelly Bean update, Google Now, a 1,280x800-pixel display, a Tegra 3 processor, and an obvious desire to kick the stuffing out of Amazon's dirt-cheap Kindle Fire.
Amazon is apparently preparing a new Kindle tablet, but it'll have to do something impressive to bring the Nexus to its knees. The device will reportedly sport a similar 1,280x800-pixel screen, a rear camera and a bump up from the Fire's basic processor and graphics performance. There's still no word on when the UK will get Fired up.
Are you interested in buying a Nexus 7 or are you waiting for a refresh to the Kindle line-up? If so, what sets it aside for you from the rest of the market? Let us know in the comments or on our Facebook page.
Image credit: iFixit
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Comments 11
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anonymous 10 July, 2012 14:03
As great as this tablet is, how can any manufacturer hope to compete, in terms of value for money, against a business that is knowingly making a loss on each item sold (initially at least)!
Colin Stone 10 July, 2012 15:50
At last a budget tablet that will do what it should! Pre-ordered mine as soon as I read the CNET review.
ace9988 10 July, 2012 17:48
The VAT Is paid by the consumer not google/asus who're making it since that's most likely either abroad or done as a wholesale item in which case they won't pay VAT. The £15 app credit is marketing cost most likely which they will recoup from all the google play store profits i.e. 10% or 30% profit from apps....the profits from renting out movies on the play store, book and magazine purchases. Also couple the fact that they've advertised this device as "made for google play" which means they are counting on alot of money coming in from aftersales, similar to what amazon are doing with the kindle fire
Not to mention the fact that this is a joint google/asus venture and it works both ways...profit and losses, so alot of things will be covered up within one another's profits
anonymous 10 July, 2012 17:57
Google don't pay the VAT but that is still part of the retail price, so the price before VAT is £132 minus the retailers cut which means they must be selling at quite a loss.
jayce35 10 July, 2012 18:51
For the price nothing will match its specs ,look at other tablets at this price there atrocious . These tablets are so inexpensive that I just brought two for my 2 daughters aged 2 and 3 so they stop hogging my iPad and iPhone
anonymous 10 July, 2012 19:29
@anonymous They can compete because Google has removed several features such as a larger screen, microSD, mhl, 3G, which a lot of people are willing to pay extra for. Reason why Google can do it at a loss is they can show off what they can do and get customers to use different parts of their markets - books, magazines and movies. They have also created a how new market for android devices on their Play market, which has been a problem for Android tablets - there being know where to sell them or find them.
anonymous 10 July, 2012 23:49
Bad move Jayce35. I don't think buying a nexus will keep my kids off my iOS devices, but it might keep me off my iOS devices. There are just way to many apps for kids in the apple ecosystem that I assume aren't available on android. Certainly possible that this will start a developer migration and their might end up being enough for android, but right now I'm pretty sure the iOS devices are going to be what my kids use on the road for playing games.
I want one of these because it appears to finally be a pure android device that isn't an also ran or one that is neutered to be channel centric like the kindle fire. So a person can freely install android apps.
anonymous 11 July, 2012 13:45
Tablets don't need 3g, everybody who owns a tablet has a smart phone in there pocket that the tablet will be tethered too. Only a fool would pay for 2 data connection tarifs.
anonymous 25 July, 2012 13:37
Remember as well, that £15 voucher gets spent on apps, developers make a profit, making android seem that bit more sweeter, great marketing ploy, something that works well for all parties even though no real profit occurs :) also, with the amount being sold i expect huge discounts for bulk buying :P
Lee Gibson 5 August, 2012 18:54
It's a good job that it is the 16gb model that is selling the most then :-)
anonymous 1 December, 2012 12:25
They might end up losing some money with each device they sell but Google's strategy is clearly to win the hearts of people instead of their wallets. They pretty much own the market of smartphone operating systems (the only competition being iOS) and are getting people reliant to only use their products, soon enough most of their competition will be bound to bend the knee like Samsung did or taking the road to oblivion like Nokia's stubbornly doing with Symbian.