Amazon's Kindle Fire Sells for $55 Over Cost
The teardown confirmed estimates the Light Reading sister company made when the tablet was first announced, and debunked theories that the fire was a loss leader. TechInsights initially estimated a $150 bill of materials (BOM), but adjusted it after learning Amazon saved $4 by not using a higher-end accelerometer/gyroscope combination and by choosing a low-cost Wi-Fi chip. (See Amazon's $199 Tablet Is No Loss Leader.)
"Our initial estimates are still pretty strong and we attest that Amazon is still making a healthy profit on each tablet sold," Allan Yogasingam, TechInsight’s technical marketing manager, writes in an email to LR Mobile.
Yogasingam says there weren’t too many surprises inside the tablet except for one major design win. ILITEK, a Taiwanese company, won the touch-screen controller order, beating out larger competitors like Texas Instruments Inc. (NYSE: TXN), which had several other design wins on the board.
In the charts above, TechInsights breaks out the components of the new tablet, followed by the costs. The Fire is compared to both the 3G Apple Inc. (Nasdaq: AAPL) iPad 2 32GB and the BlackBerry BlackBerry Playbook, the device it most closely resembles.
A loss leader?
IHS iSuppli , without having done a teardown, estimated that the Fire costs Amazon $209.63 to build, suggesting a loss on each one sold. The analyst firm put the touch screen at $17 more than TechInsight's did in its findings, as well as estimating the battery to be $6.25 more expensive.
Either way, Amazon is building its business on the digital and physical goods it will sell once the tablet is in consumer hands. It's a means to an end more than a moneymaker on its own. IHS iSuppli estimates that when digital content per device is factored in to the overall BOM and manufacturing costs, which it had at $209.63, Amazon will make around $10 on each Kindle sold. This doesn't factor in physical sales, the bread and butter of Amazon’s business model.
"Amazon is selling it direct through the website and has the connection to the content right there," TechInsight VP of Business Intelligence Jeffrey Brown said in a pre-launch interview. "You go for the content first; then they mention they have the tablet for $199."
— Sarah Reedy, Senior Reporter, Light Reading Mobile