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August 29, 2012

Samsung Galaxy Reaches for the Sky


According to a physical dissection of the media tablet steered by the Teardown Analysis Service at information and analytics provider IHS (News - Alert) (NYSE: IHS), if Samsung can maintain its target selling price, the Galaxy Note 10.1 could deliver a better margin than the current industry leader iPad.

The Galaxy Note 10.1 sells for approximately $640. This selling price, however, is largely dependent on the make of the tablet itself. As revealed by a preliminary analysis of the component cost of the Galaxy Note 10.1, the HSPA+ version of the media tablet carries a bill of materials (BOM) of $283.

The cost to produce the tablet increases to $293 when basic manufacturing costs are added in.

Though the U.S. retail pricing for the Wi-Fi-only version of the Galaxy Note 10.1 is priced at $499, the BOM is estimated to decline to about $260. The new iPad with Wi-Fi and 16GBytes of NAND flash memory, similarly equipped, carried a total cost of $316 at the time of release and a retail price of $499.

On paper, Samsung (News - Alert) will be able to reap a bigger margin on the Galaxy Note 10.1 than Apple did for the iPad.

“With the Galaxy Note 10.1, Samsung continues to seek the magic formula for a media tablet that can rival the iPad’s market penetration,” stated Andrew Rassweiler, senior director, Teardown Services for IHS.

Rassweiler feels that if Samsung can extend the recent success of the Samsung Galaxy Note smartphone to its tablet line, then the Galaxy Note 10.1 can turn a solid per unit margin for Samsung, regardless of whether other tablets introduced recently generate any hardware profit.

The Google Nexus 7 and the Amazon Kindle Fire started using more complex business models involving online services to profit since their original sales prices and BOMs generated little-to-no hardware profit.

For many vendors, however, maintaining the opening sales price over time has proven to be the Achilles’ heel.

Rhoda Alexander, director of Tablet and Monitor Research for HIS, believes if Samsung is able to maintain its initial price, the hardware profit margin for the Galaxy Note 10.1 would increase. Apple (News - Alert) competitors would need to sell in volume at $499 instead of falling back on price drops in order to drive volume to demonstrate their capability.


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Edited by Braden Becker
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