High profit margin ... Microsoft's Surface tablet. Photo: AP
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 $US267 in parts and labour when excluding its optional keyboard cover. It went on sale on October 26 priced at $US499 ($A559 in Australia), for a profit margin of around 46 per cent. 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 memory.
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 $US333 and retailed for $US599 ($A649 in Australia), for a 44 per cent profit margin. The 16GB base model cost $US316 and was priced at $US499 ($A539 in Australia), for a profit margin of 37 per cent.
A preliminary analysis of the fourth-generation iPad, which comes with a faster processor and went on sale Friday, costs about $US305 in parts and labour for the 32GB wi-fi-only model, which sells for $US599 ($A649 in Australia) for a 49 per cent margin, estimates IHS analyst Andrew Rassweiler. The 16GB base model costs about $US295 and sells for $US499 ($A539 in Australia), 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 such as Dell and Lenovo can compete even after paying Microsoft for the operating system.
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 $US198 for parts and labour. This 16GB model has a retail price tag of $US329 ($A369 in Australia), for a profit margin of 40 per cent.
The 7-inch offering from Google, the Nexus 7, costs $US159 for its 8GB model and sells for $US199, according to IHS. That's a profit margin of 20 per cent. Google makes a little more on its 16GB model, which costs about $US167 to make but sells for $US249, for a 33 per cent margin.
Amazon.com spends about $US174 to make its 7-inch Kindle Fire HD with 16GB of memory and sells it for $US199, for a profit margin of 13 per cent. That's better than the original Kindle Fire, a money-loser that, on launch, cost Amazon about $US202 for every $US199 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.