IHS Teardown Finds Microsoft Surface Costs $271 And TouchCover Costs Just $16 To Build

According to research firm IHS, Microsoft Surface 32GB costs $271 to build it and TouchCover costs just $16 to build. Microsoft Surface’s main components include a Tegra 3 processor chip from Nvidia, and a display and memory chips from Samsung. Samsung appears to be having a healthy profit from Surface by supplying display, the memory chips and the battery, pocketing about $137 (almost half of total Surface cost).

As every other OEM do, Microsoft seems to be profiting more from the TouchCover keyboard accessory. TouchCover includes chips from Atmel and Freescale Semiconductor and since it’s a compelling accessory for users, Microsoft is trying to squeeze more profit margin from it.

You can read more about it from All Things D here.

  • Bob Lob Law

    Kind of wish I didn’t know this… haha

    • http://www.facebook.com/people/Gavin-Tom/100001144097567 Gavin Tom

      me too, but of course you should see the other things you buy that cost even less, like food and drink. So I’m more than happy to pay what microsoft charged me. The build quality is amazing. They gotta make money too!

  • Bugbog

    If this is correct (and not FUD), then I say very Good Microsoft. Well done!

    They took my money and I consider it well spent! (Now I’m off to get a Blue Touch Cover @ 99 bucks!)

    • Mar

      No Labour, No marketing expenses, No transportation, No taks, No R&D… Those tear downs are a big FUD. For a company the scale of Microsoft with massive expenses and overhead. I say this is a fair price, and actually the tablet is getting ‘subsidized’ by the overpriced covers. Which kind of makes sense :) the choice is there to get the cheapest version, cheaper.

    • Mar

      And don’t forget the rumoured 85$ Windows RT license fee, which the Surface dept. also has to pay to the Windows dept. Making the costs much closer to the parts costs. So except for the touch/type covers, the price of the tablet is very very fair. And like I said, the steep price on the covers is probably to subsidize the tablet.

      • Ryan Smith

        Did you even think about what you typed?
        Microsoft charging themselves for the Windows RT license fee?
        It’s actually the exact opposite and why a lot of OEMs feel slighted by the Surface as they have to pay this fee, but Microsoft obviously does not as they have full control over the operating system and thus can just slap in Windows RT for no cost to them.

        • Mar

          No your logic is flawed, the license fee has to be paid anway… even on their own Surface it includes the license fee. The simple fact is that the development of Windows has to be funded. The sales of the Surface would otherwise not fund the Windows development, hence the Windows department will lose money (since the Surface would be getting a “free” license according to you).

          No matter how you look at it, the Windows RT license is included and will be incorporated in the price.

          Simple economics.

          • Agrippa

            You know… except for the part where Microsoft says that’s not the case. Microsoft’s partners says that’s not the case, and everything you’ve just said is words words words without actually thinking.

            I don’t think business and supply chain works the way you think it works. Might I suggest you google (or bing) to learn more. No rush. We’ll wait.

          • http://www.facebook.com/people/Gavin-Tom/100001144097567 Gavin Tom

            lol you just made my day a little better. Your argument makes no sense, I see where you are going with it but again, No.

  • Sergio

    Well BOM isn’t the only thing that comes to play… I’m talking about R&D, infrastructure so 500$ for a BOM of 270$ is “normal”, I mean they are playing fair with other OEM’s, they are not trying to undercut the competition just because they don’t need to make a margin on hardware (looking at you Google and Amazon). But 16 for the touch cover and selling it for 120 is kind of outrageous… guess that means there is room for the prices to come down

  • Ocelotty1

    labour costs, raw materials, factory profit margins, transportation costs which have skyrocketed for containers from Asia recently, reseller profit margins & labour costs, as well as the final end seller profits
    None of which factors in the massive R&D costs and new factory infrastructure and equipment costs. Have I missed anything? Oh yes tax

    • rjmlive

      Packaging, testing, software.. I assume materials cost does not include shipping of the components to be assembled as well.

  • yeah

    iPhone costs less than 200$ to build and Apple sells it for 700$…
    But Apple is Apple so that price is fair -.-‘

  • ryan

    As others have said, there are many other costs involved besides just building the thing. Also, it is important that MS makes a reasonable profit from the thing and that its prices are in line with competitive devices.

    If MS sold this thing for somewhere in the $300 range, it would completely undercut other partners making W8 hardware and that would be bad.