Kindle Fire sells for $199, while bill of materials cost about $202

Fri, Nov 18, 2011


The Amazon Kindle Fire is an interesting beast. Set to take on the iPad and other tablets, the Fire is able to leverage the media content of Amazon to give it a leg up on the competition. But it takes more than just a robust media content delivery system to compete with Apple as the Kindle Fire has been plagued with absolutely scathing reviews. Nonetheless, the device seems to be selling well, no doubt bolstered by its visible placement on the heavily trafficked Amazon homepage.

Adding another wrinkle to the interesting saga of the Fire, IHS iSuppli recently tore down the Kindle Fire and found that its component parts cost about $202. That’s an interesting figure given that Amazon sells the device for $199. This news confirms earlier reports that Amazon is losing money on every single Kindle Fire sold. Perhaps Amazon will succeed in positioning the Fire as a loss leader, but that presupposes that a significant number of Kindle Fire owners are signing up for $80/yr Amazon Prime accounts and/or buying a ton of digital media.

But given the device’s horrid reviews, will consumers even use the Kindle Fire that much to warrant significant download activity?

As for the cost of manufacturing, iSuppli notes that Amazon certainly skimped on the hardware to get the cost of materials down as low as possible.

All Things D notes:

There are several examples of where Amazon clearly intended to minimize its hardware costs, Rassweiler says. For one thing, most tablets contain 8 gigabytes gigabits of DRAM memory. The Fire contains only four. It also contains only 8GB of flash memory used for storing content, where the iPad starts at 16GB and goes up to 64GB. Amazon also skipped other features, like a camera and Bluetooth connectivity, and more expensive wireless chips.

“All the choices have been made here to minimize the hardware cost,” Rassweiler says. “We expected to see a certain wireless module that’s commonly been seen in other tablets, and we were surprised that it wasn’t there. There was a cheaper one with fewer features that saved them a few bucks.” The chips were combined into a module manufactured by a previously unknown company called Jorjin, he says.

Again, we’re sure the Kindle Fire will sell well. The key metric here, though, isn’t initial sales. It’s long term staying power. The Kindle Fire might very well be at the top of everyone’s Christmas list for the time being, but the negative reviews and plethora of usability issues may ultimately stop the Kindle Fire in its tracks.


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