Higher Component Costs Drive Xoom's iPad-Topping Price

When Motorola announced the price of its Xoom tablet earlier this month, the news was met with dropped jaws and preemptive eulogies for the device. At $799 for the unsubsidized 3G version, many said there was little chance that the Xoom would be able to compete with the iPad.

But a recent teardown and component analysis from iSuppli reveals the reason for Motorola's seemingly suicidal price point for the Xoom -- high component costs.

The display is a big factor. At $140, almost forty percent of the Xoom's manufacturing cost comes from the device's 10.1-inch touch screen. The iPad's touch screen, by contrast, costs $125.

Memory is the second most expensive piece of the Xoom. At $88, 22 percent of the cost is memory. For the iPad's it is $67. Predictably, the Xoom's dual-core processor costs twice as much as the iPad's single-core A4 processor. The processor, at $20, accounts for five percent of Xoom's cost. One feature of the Xoom not represented in the iPad is the pair of cameras, which together add $14.

A major missing piece of the Xoom's is its 4G radio, which isn't included in the device. Xoom users interested in upgrading to 4G must send the device to Motorola, which will modify the device for free. Of course, free in this case isn't very accurate, as the costs of the devices 4G capability are already built into the device, according to Motorola Mobility CEO Sanjay Jha.

We felt that our ability to deliver 50Mb/s would justify the $799 price point. It is 32GB with 3G and a free upgrade to 4G. Being competitive with iPad is important. We feel that from the hardware and capabilities we deliver we are at least competitive and in a number of ways better [than the iPad], Jha said.

But with the release of the iPad 2 on the horizon, the Xoom's advantages may soon disappear. Currently, the only major feature in the Xoom not present in the iPad is the Xoom's camera functionality, a feature Apple is likely to include in the iPad 2.

To contact the reporter responsible for this story call (646) 461 7294 or email r.bilton@ibtimes.com.