Microsoft Surface RT More Profitable than iPad, Teardown Analysis Reveals
The Surface RT model with the minimum 32 gigabytes of NAND flash memory and an optional black Touch Cover carries a bill of materials (BOM) of $271.00, according to a preliminary estimate from the IHS iSuppli Teardown Analysis Service.
Context & Ripple Effects
IHS iSuppli’s March teardown put the 32GB 4G new iPad’s bill of materials at $364.35. Its preliminary estimate places the entry Surface RT with a Touch Cover at $271, making component cost a visible part of Microsoft’s tablet positioning against an iPad that still held a leading share of tablet web traffic in the supplied coverage.
The analysis travelled broadly across technology outlets, underscoring how closely the market is watching whether Microsoft can translate a lower hardware cost base into a viable challenge to Apple.
First-order effects
- Microsoft has more room than the compared iPad configuration to use pricing, Touch Cover bundling, or channel incentives without immediately eroding hardware gross profit, based on IHS iSuppli’s preliminary component estimate.
- Apple faces a new rival whose entry hardware is positioned with a lower bill of materials, though teardown cost alone does not establish either device’s realized margin.
Second-order effects
- Component suppliers, including NAND providers, gain a benchmark customer in Surface RT: Microsoft’s ability to sustain its price position depends on keeping the $271 materials base in check as it builds volume.
- Tablet competition shifts some attention from headline specifications to the cost of the full device-plus-accessory package, pressuring rivals to justify higher prices through product differentiation rather than component cost alone.
Third-order effects
- If Microsoft can pair a lower tablet materials cost with sufficient demand, the category’s competitive boundary moves toward integrated hardware-and-accessory economics rather than a contest defined only by the tablet itself.
- Teardown estimates are becoming a public competitive signal: they give rivals and suppliers a common yardstick for judging which tablet designs have room to absorb price competition.
The trend: Tablets are becoming a margin-management contest in which bill-of-materials discipline and accessory economics shape how aggressively vendors can challenge incumbent pricing.