November 19th, 2011

After the low-​cost Kindle Fire tab­let, will Amazon make a low-​cost smartphone?

Amazon SmartphoneAn “Amazon smart­phone may be com­ing next year,” accord­ing to a research report by Citi ana­lysts Mark Mahaney and Kevin Chang. The report comes hard on the heels of the launch of Amazon’s Kindle Fire tab­let, at an ultra-​competitive price point, and rumours of Kindle Fire with a big­ger 8.9 inch screen being launched in Q2 2012.

Citi’s ana­lysts, hav­ing checked with hard­ware man­u­fac­turer sources in China, believe that Amazon is jointly devel­op­ing the smart­phone with Fox­conn, but that the phone itself will be man­u­fac­tured by TMS (which pro­duces the Kindle line).

The chips that will power the phone are at this point believed to be a Texas Instru­ments OMAP 4 pro­cessor and a Qual­comm “dual mode 6-​series stan­dalone base­band” (HSPA+ /​CDMA EVDO).

What is import­ant to note is that Amazon does not need to make money on hard­ware.” Mark Mahaney and Kevin Chang, Citi analysts

A rough estim­ate of the mid-​range hard­ware costs would put pro­duc­tion costs in the region of $150 to $170 per unit. Nor­mally, this would sell at a retail price of $300 or less to make a profit. But, Amazon’s price point for the Kindle Fire, which sells at $200, is believed to be less than it costs to man­u­fac­ture. It is pos­sible that the com­pany will also con­sider sub­sid­ising the cost of a future smart­phone to the same tune to make it ultra-​competitive.

It is thought that Amazon views mobile devices as ‘digital shops’ and deliv­ery devices for its digital products, so it is less con­cerned about mak­ing a profit on the hard­ware. It is hop­ing that with its devices in the hands of as many con­sumers as pos­sible, over time it will make far more money from digital books, movies, music, games, sub­scrip­tion ser­vices and mCommerce.

1 comment to After the low-​cost Kindle Fire tab­let, will Amazon make a low-​cost smartphone?

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