A preliminary estimate from the IHS iSuppli Teardown Analysis Service suggests that Microsoft is making more money per unit with its new Surface RT tablet than Apple makes from a basic iPad. After conducting a ‘teardown’ of the Surface RT model with 32GB of memory and an optional black ‘touch cover’, IHS iSuppli calculated that its components were worth $271 and the manufacturing cost was $13, resulting in a total cost of $284 (£178). The device retails in the USA for $599.
In March, the third-generation iPad with 16GB memory and no mobile connectivity was thought to have a combined ‘bill of materials’ (BOM) and manufacturing cost of $316 whilst retailing at $499. Even without the touch cover, Microsoft is expected to create a per-unit profit margin that’s greater than an entry-level iPad.
Andrew Rassweiler, senior principal analyst for teardown services at IHS, said “The Surface represents a key element in Microsoft’s strategy to transform itself from a software maker into a devices and services provider. Key to this strategy is offering hardware products that generate high profits on their own, similar to what Apple has achieved with its iPad line. From a hardware perspective Microsoft has succeeded with the Surface, offering an impressive tablet that is more profitable, on a percentage basis, than even the lucrative iPad based on current retail pricing.”
IHS iSuppli notes that its preliminary teardown assessment only accounts for hardware and manufacturing costs and does not include additional expenses such as software, licensing or royalties.