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Microsoft makes $315 for each Surface RT sold

Posted: 07 Nov 2012 ?? ?Print Version ?Bookmark and Share

Keywords:Surface RT? iPad? tablet? Bill of Materials? Touch Cover?

According to a teardown analysis performed by IHS iSuppli, Microsoft Corp.'s Surface RT tablet is poised to generate a higher profit per unit than a comparable version of Apple Inc.'s iPad.

The IHS Teardown Analysis Service found that the Surface RT model with a minimum of 32 gigabytes of NAND flash memory and an optional black Touch Cover carries a bill of materials (BOM) of $271.00. Adding in $13 in manufacturing expenses, the total cost to make each Surface rises to $284, according to IHS.

Microsoft retails the 32-gbyte version of the Surface with the Touch Cover for $599, generating a profit of $315 per unit, according to the IHS analysis. Even at a price of $499 without the Touch Cover, Microsoft will generate a profit margin that is greater than the low-end iPad in both percentage terms and on a per-unit basis, according IHS.

The IHS teardown of the Surface RT found components made by chip suppliers including Samsung Electronics Co. Ltd., Freescale Semiconductor Inc., Atmel Corp., Nvidia Corp. and others, IHS said.

Figure 1: Preliminary BOM and Manufacturing Costs for the Surface RT with 32Gigabytes of NAND Flash and a Black Touch Cover (In U.S. Dollars)
Source: IHS iSuppli Research, November 2012.

"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 of teardown services at IHS, in a statement.

According to Rassweiler, a key to Microsoft's strategy is offering hardware products that generate high profits on their own. "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," Rassweiler said.

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