Microsoft the king of tablet profit margin, and Intel

IHS Suppli has revealed the bill of material of various tablets. This doesn’t include manufacturing costs, so it will cost a bit more to put them together. I think these BOM’s are only a rough estimate of the cost, because no one knows the inside deals they made within companies.

Product Name BOM Price Margin
Kindle Fire HD (16g) $165 $199 17.09%
Nexus 7 (8g) $152 $199 23.62%
iPad 3 (16g) $306 $499 38.68%
iPad Mini (16g) $188 $329 42.86%
Samsung Galaxy Note 10.1 (16g) $260 $499 47.90%
Microsoft Surface RT (32g) $271 $599 54.76%

The Microsoft Surface RT is by far the most profitable of all. I think the reason why Microsoft priced their RT tablet so high is because of keeping their hardware partners friendly. Previously, the hardware partners have displayed great resistance to Microsoft competing directly with themselves. Microsoft could easily price its Surface RT far lower and undercut its arch rivals for more volume. It would probably mean more profits in dollar terms for Microsoft as well. This point proves that Microsoft doesn’t really care about its Surface RT so much. It is just there to have a product to compete with the iPad. Microsoft’s big gun should be a full fledged touch screen computer – the Surface Pro. Another thing I’ve noticed is how come it is so cheap for Microsoft to make a 32g tablet. Does it mean the hardware quality is substandard?

Intel

Another headline that caught my attention today – “Apple said to be exploring switch from Intel for Mac“. Like I have read at least a year ago, now it seems to be getting official on mainstream media. Intel is in a very precarious situation, having missed out in the mobile market, now it will lose market share in the traditional PC market. This is really a tough challenge for Intel. But, like all big companies, it is unlikely it will die out due to this technological change. It can somehow develop new chips to cater for the change, right? However, I don’t have the technical/engineering expertise to make this call.

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