Microsoft Surface RT teardown shows giant retail profit margin

Nov 5, 2012
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The folks that see how inexpensive an item is to produce and feel that the manufacturer should have little to no profit over this cost are certainly not going to enjoy what they're hearing from IHS iSuppli about Microsoft today, that's for sure. With a a Bill of Materials (BOM) cost of $271 USD and a $13 USD manufacturing cost, the total cost of the Microsoft Surface RT with minimum 32GB NAND flash memory becomes $248 in all, this placing it well below retail price at $599. IHS iSuppli note that compared to the low-end iPad (that being the iPad 2 in this case), the Surface RT generates a greater profit margin in percentage terms and on a per-unit basis as well.

These same folks did a teardown of the iPad mini recently and found the total cost of manufacturing to be $188 USD. Compared to its $329 retail price (and we're talking about lowest-end iPad mini models here), that's $141 USD profit per unit. It should be noted that licensing and software additions are not figured into this price or any other price in this study as conducted by IHS iSuppli. The amount of money the iPad mini costs to manufacture is approximately 43% of its total retail price.

The amount of cash between the cost to manufacture the Microsoft Surface RT and its retail cost is $351, that being 70% of its retail cost - and a whopper of a margin. When you break down the costs that IHS iSuppli found in the Surface RT, you find that it's the touchscreen display that takes up the major bulk of the cash at $101 USD. This is followed by the mechanical and electro-mechanical bits costing $35 in total and the memory (that being 2GB DDR3L + 32GB eMMc NAND Flash + DRAM) costing $34 USD.

The iPad 3rd gen (16GB) was also torn down by IHS iSuppli back a few months ago (the 4th gen not quite ready for analyzation yet), with a total BOM at $316 with a pricetag at $499 USD. The Samsung Galaxy Note 10.1 (16GB) was also torn down and found to carry a BOM of $260 USD (with that same $499 USD pricetag in stores.) It would appear that Microsoft truly has the margin in all cases - now we've got to see if they can keep that price up.

[via IHS iSuppli]


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