A trio of reports from iSuppli yesterday revealed that while Apple makes a respectable profit on its iPad, Microsoft likely has a larger profit margin with its Surface RT tablet.
iSuppli regularly disassembles consumer electronics and estimates the cost of materials and assembly. In this case, it estimated the cost of the Surface RT tablet with 32GB flash memory and a touch-sensitive cover at $271. An additional $13 for manufacturing put the total cost at $284. Microsoft sells that model for $599, giving it a profit margin of $315, or 111 percent.
The estimate does not include software, research and development, marketing, or other costs.
The analysis further broke down key components’ prices. The most expensive element is the 10.6-inch touchscreen at $101. The touch cover, which adds $100 to the Surface RT’s base price when purchased along with it and is also sold by itself for $119.99, was estimated to cost between $16 and $18 to build.
The base model Apple iPad mini, with a smaller screen, no cover, and less flash memory, costs an estimated $188. The $10 manufacturing cost brings the total to $198. The selling price of $329 results in a profit margin of $131, or 66 percent. As with the Surface RT, the screen was the main cost driver at $80.
iSuppli also examined the components of the Amazon Kindle Fire HD, the online retailer’s latest 7-inch Android tablet. Although it had the lowest bill of materials cost - $165 – and lowest manufacturing cost - $9 – its low sale price resulted in the lowest profit by far of the three devices. The combined materials and assembly cost of $174 taken together with the sale price of $199 results in a profit margin of only $25, or 14 percent.
Amazon uses the Kindle to promote downloads of books, music, and video, so strategically takes little profit on the device itself. Apple and Microsoft also offer digital downloads for their respective tablets but take more profit initially.
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