The biggest rubber neck piece of tech heading into the holiday season will undoubtedly be Amazon’s Kindle Fire. Priced at a consumer-friendly $199, the device has garnered a lot of interest since its September announcement. You’d think with such attention the no-frills device would surely be a huge cash cow for the Seattle-based Internet company, right? Well, in all probability, yes. But as it turns out, Amazon is selling each device at a loss, according to research firm IHS iSuppli.
In all, materials, components, assembly and manufacturing pegs the tablet at $201.70. That means for every tablet sold, Amazon will be down $2.70. It doesn’t sound like a whole lot, but when you consider sales are estimated to top 5 million by the end of 2011, the difference can head into the $13 million range. To compare, the base iPad 2 model costs $326 to make, while Apple sells it for $499.
The Fire’s most expensive component is its display touch screen, which comes in at $87.00, iSuppli said in its report. Second is its Main PCB at $64.45, while Memory is $22.10.
Amazon need not worry, though. Whatever the company loses up front will surely be made up through the sale of books, apps and movies. Plus, manufacturing costs typically descend over time as material prices go down. A move that helped lower the cost was Amazon’s decision to exclude a camera, microphone, microSD slot and 3G – features found on higher-end tablets.
Jeff Bezos, CEO of Amazon, made known back in September the company was content to live with a smaller margin. Still, some analysts are uncertain the gamble will pay off. Though the company has a strong content library, analysts believe customers who purchase a Fire are unlikely to repurchase music or other media to put on the 7-inch tablet.
We want the hardware device to be profitable and the content to be profitable. We really don’t want to subsidize one with the other, Bezos said.
We’ve been toying around with the Fire for the past few days and will have our full impressions of the device soon.
What are your impressions of the Kindle Fire so far?