Los Angeles - Microsoft and Apple are garnering the highest
profit margins for their tablets, followed by Google and then Amazon, according
to research firm IHS.
Microsoft's first self-made tablet, the Surface, costs about
$267 in parts and labor when excluding its optional keyboard cover. It went on
sale October 26 priced at $499, for a profit margin of around 46%. Surface
comes with a 10.6-inch screen measured diagonally, and can access the Internet
only through Wi-Fi. The price is for its base model with 32 gigabytes of
With a similar configuration, the Surface bakes in slightly
more profit for Microsoft than Apple. did when it released its third-generation
iPad in March.
Apple's third-generation Wi-Fi-only iPad with 32GB of memory
and a 9.7-inch screen cost an estimated $333 and retailed for $599, for a 44%
profit margin. The 16GB base model cost $316 and was priced at $499, for a
profit margin of 37%.
A preliminary analysis of the fourth-generation iPad, which
comes with a faster processor and went on sale Friday, costs about $305 in
parts and labor for the 32GB Wi-Fi-only model, for a 49% margin, estimates IHS
analyst Andrew Rassweiler. The 16GB base model costs about $295 and sells for
$499, he says.
IHS' analysis excludes costs for marketing, sales or
operating system-software, which Microsoft has been touting with its device.
The research firm obtains the devices independently and breaks them apart to
estimate the cost of the components.
The analysis suggests Microsoft is imputing a cost for its
latest operating system, the slimmed-down Windows RT, which debuted last month.
It also needs to price its flagship tablet high enough so that manufacturing
partners like Dell and Lenovo can compete even after paying Microsoft for the
Apple is maintaining premium pricing as the market leader.
Among smaller-sized tablets, the iPad Mini that went on sale
on Friday boasts a 7.9-inch screen measured diagonally and costs $198 for parts
and labor. This 16GB model has a retail price tag of $329, for a profit margin
The 7-inch offering from Google, the Nexus 7, costs $159 for
its 8GB model and sells for $199, according to IHS. That's a profit margin of
20%. Google makes a little more on its 16GB model, which costs about $167 to
make but sells for $249, for a 33% margin.
Amazon.com spends about $174 to make its 7-inch Kindle Fire
HD with 16GB of memory and sells it for $199, for a profit margin of 13%.
That's better than the original Kindle Fire, a money-loser that, on launch,
cost Amazon about $202 for every $199 it collected on a sale.
Google is aiming to both make a profit and broaden the reach
of its Android operating system, while Amazon is looking to make up the profit
gap when customers buy movies, books and magazines from its store.
"Amazon and Google want to put tablets in consumers'
hands - even if it means doing so at a minimal hardware profit,"
Rassweiler said in a statement.