Amazon will retail its Kindle Fire tablet at below cost for$199 in the USA with the device set to sold in Australia for $50 over the US price due in part to the lack of content for Australian users.
IHS iSuppli estimates that it costs $209.63 to build the device with Amazon looking to recover the difference between the US price and the build price via the sale of content spanning books, music, movies and applications.
The pricing underscores Amazon’s focus on using its e-readers and tablet to promote the online sale of its physical good, the research company said.
A preliminary estimate conducted by the IHS iSuppli Teardown Analysis Service places Kindle Fire’s bill of materials (BOM) cost at $191.65. With the addition of manufacturing expenses, the total cost to produce the Kindle Fire hits $209.63, IHS said.
With the expected lifetime sales of digital content per device, however, Amazon will likely generate a razor-thin marginal profit of $10 on each Kindle Fire sold, IHS continued, given that Amazon sells content at a loss. The real value of the tablet, as with the Kindle e-readers, is to use content “to get shoppers in the door” and then sell them all sorts of other goods, IHS said. “The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content.”
The tablet and the “content demand it stimulates will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon’s business.”
|Amazon Fire – Preliminary Hardware Cost Estimates|
|Display & Touchscreen $87.00|
|Main PCB $70.40|
|Apps Proc $15.00|
|Other & Peripheral PCBs $24.40|
|Box Contents $5.00|
|Sub Total $191.65|
|Manufacturing Costs $8.40|
|EMS Margin $9.58|
|Hardware Cost to AMZ $209.63|
|Source: IHS iSuppli Research, September 2011|