Microsoft Surface RT teardown reveals huge profit margin
Tuesday, November 6, 2012 @ 5:03am
A new teardown shows that Microsoft is generating huge profit margins out of each Surface RT tablet that it sells. According to IHS iSuppli, the bill of materials (BOM) for the Surface RT tablet 32GB is $248 plus $18 for the TouchCover, which Microsoft is selling for $599. By comparison, an earlier teardown of the third-generation iPad revealed that it costs Apple $316 to make, which it then sells for $499 indicating that Microsoft is making a substantially higher gross profit for each tablet it sells.
“The Surface represents a key element in Microsoft’s strategy to transform itself from a software maker into a devices and services provider,” said Andrew Rassweiler, senior principal analyst for IHS. “Key to this strategy is offering hardware products that generate high profits on their own…[The Surface RT tablet] is more profitable, on a percentage basis, than even the lucrative iPad based on current retail pricing.”
The most expensive component in the Surface RT tablet is the display, accounting for $101 of its $248 BOM. Nvidia’s 1.5GHz quad-core Tegra 3 processor costs $21.50 per chip, while the system RAM, DRAM and NAND flash memory amount to $34. Samsung supplies the NAND flash memory as well as the battery, which it sells to Microsoft for $20. The entry-level version of the Surface RT tablet, which is retailing for $499 is currently shown as out of stock in all of Microsoft’s online stores.