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Amazon to Sell Kindle Fire Below Cost

By - Source: IHS | B 25 comments

There have been some questions why Amazon can sell its Kindle Fire for just $199 and there has been speculation that Amazon may be taking a loss with every Fire sold. IHS seems to confirm those rumors.

According to a teardown conducted by IHS, the fire has a bill of materials (BOM) of $191.65. However, that does not include the cost of assembly. Including manufacturing, each Fire is estimated to cost Amazon $209.63. And even that price does not include shipping and secondary cost such as R&D and marketing and PR. The actual cost of the Fire on Amazon's balance sheet may be much closer to $225 per unit.

IHS said that even if the sale of digital content is factored into the cost/revenue equation, Amazon is likely to make a marginal profit of just $10 on each Fire sold. However, Amazon's interest with the Kindle Fire is not to make profits of hardware or digital books anyway. IHS noted that what Amazon really wants is to get Fire users to "buy shoes, diapers, and every other kind of physical product imaginable." Amazon's retail business generated $34 billion in sales in 2010.

According to the market research firm, the most expensive component in the Fire is the $87 touch screen, followed by a $15 applications processor. IHS said that it will be providing a detailed teardown in the near future.

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Top Comments
  • 12 Hide
    Hellbound , October 1, 2011 10:27 PM
    If this becomes a successful product, Apple will make up a reason to sue Amazon..
  • 11 Hide
    shloader , October 1, 2011 8:24 PM
    So if we all get one and start shopping on NewEgg :-p
Other Comments
  • 11 Hide
    shloader , October 1, 2011 8:24 PM
    So if we all get one and start shopping on NewEgg :-p
  • Display all 25 comments.
  • 4 Hide
    cuecuemore , October 1, 2011 8:25 PM
    Lulz!! Brilliant move!
  • 4 Hide
    halcyon , October 1, 2011 8:57 PM
    Very smart move indeed
  • -6 Hide
    kcorp2003 , October 1, 2011 9:31 PM
    this what i said.... http://youtu.be/9TXd0GhSGUs?t=40s
  • -2 Hide
    sgtopmobile , October 1, 2011 10:22 PM
    i am gonna be honest i prefer 10000 times buying computer parts in amazon than in newegg, i find better prices in amazon and all products sold by amazon itself has free shipping.
  • 12 Hide
    Hellbound , October 1, 2011 10:27 PM
    If this becomes a successful product, Apple will make up a reason to sue Amazon..
  • 5 Hide
    aaron88_7 , October 1, 2011 10:37 PM
    sgtopmobilei am gonna be honest i prefer 10000 times buying computer parts in amazon than in newegg, i find better prices in amazon and all products sold by amazon itself has free shipping.

    Free shipping through DHL which takes forever as is probably going to have a few bumps by the time it gets to your door.

    I'll stick with NewEgg, never had anything take more than 2 days to get to my front door.
  • -5 Hide
    Anonymous , October 1, 2011 11:04 PM
    I am so glad we have an expert who can tell the cost without ever seeing the product or even knowing what is in it. All the info they have are a few key features.
    M
  • -4 Hide
    killerclick , October 2, 2011 3:34 AM
    You can buy everything you want on Amazon even with a dumbphone.
  • -5 Hide
    jrharbort , October 2, 2011 4:01 AM
    And by rooting it, you can have yourself an amazingly cheap Android tablet for just $200. That's not bad at all.
  • 1 Hide
    species8472 , October 2, 2011 6:25 AM
    Say what you will about the iPad or even Apple itself, the iPad is an amazing product. I would not buy it. To me, it's like an iPod Touch with more screen space and not worth the extra money.

    I would not mind finding an acceptable alternative to the iPad. The nook color seems to be a competitor to the iPad at the moment and it's horrible! The touch screen is imprecise, glitchy, not very sensitive, and the operating system is slow and jerky compared to the smoothness of the the iPad's operating system. If the Kindle Fire provides a good alternative experience to the iPad and the nook, I may consider picking one up.
  • -3 Hide
    Zingam , October 2, 2011 6:35 AM
    Poor companies always losing money. I bet they are making profit even at that price and I really don't trust these crappy analysis.
    Here is my BOM: LCD - $30, CPU $20, plastic case $0.5, screws/glue $0.04, battery and other crap $49.90. R&D & transportation for 5 million units $20-50. So they better be making a profit!
  • 2 Hide
    Zingam , October 2, 2011 6:41 AM
    species8472Say what you will about the iPad or even Apple itself, the iPad is an amazing product. I would not buy it. To me, it's like an iPod Touch with more screen space and not worth the extra money.I would not mind finding an acceptable alternative to the iPad. The nook color seems to be a competitor to the iPad at the moment and it's horrible! The touch screen is imprecise, glitchy, not very sensitive, and the operating system is slow and jerky compared to the smoothness of the the iPad's operating system. If the Kindle Fire provides a good alternative experience to the iPad and the nook, I may consider picking one up.


    What made iPhone and then all iOS so popular was the great balance of hardware/software (OS), good development tools for third party apps, the app store/the whole content delivery infrastructure. And they were first to deliver it. This made it possible for them to charge so much too.
    I'm not an iPhone fan and don't even need one. But it is a great all around product. It just delivers, although I think it has lots of rough edges but in comparison the competition is much worse.

    I'd rather buy an android tablet but every time I've tried an android tablet and then when I look at an iPad. I cannot justify the buy at that price point!!! These things are just a toy and not very useful tools. They should cost much less.
  • 1 Hide
    flybri , October 2, 2011 10:24 PM
    Thank god one company finally woke up. I've been saying this for god knows how long -- To compte with Apple and have a chance at taking away any significant marketshare, you have to compete with Apple on cost. To do this requires that you start selling your hardware at a loss in the beginning...that's the only way. Once you build up enough market share, in the future you will be able to sell them at a profit. That's how it is. I can't believe how dumb all these other companies are. The head of the tablet division of a company needs to go to the CEO and say "To compete with Apple we have to sell our first tablet(s) at a loss to gain market share and compete with Apple. If you aren't comfortable with this, then we shouldn't be making tablets that try to compete with the iPad"
  • 0 Hide
    FloKid , October 3, 2011 12:45 AM
    Major respect for not ripping us off!!!
  • 0 Hide
    dark_knight33 , October 3, 2011 1:24 AM
    flybriThank god one company finally woke up. I've been saying this for god knows how long -- To compte with Apple and have a chance at taking away any significant marketshare, you have to compete with Apple on cost. To do this requires that you start selling your hardware at a loss in the beginning...that's the only way. Once you build up enough market share, in the future you will be able to sell them at a profit. That's how it is. I can't believe how dumb all these other companies are. The head of the tablet division of a company needs to go to the CEO and say "To compete with Apple we have to sell our first tablet(s) at a loss to gain market share and compete with Apple. If you aren't comfortable with this, then we shouldn't be making tablets that try to compete with the iPad"


    Wish I could +1 this post 20 times. I've been saying the exact same thing. People are getting paid millions, and just "don't get it". You and I need to startup a couple tech companies and school these idiot CEOs. Yes, Meg Whitman, I mean you.
  • 0 Hide
    Anonymous , October 3, 2011 4:48 AM
    Below cost my butt... You mean below RRP. They still make money, it just registers as a loss against the RRP.
  • 0 Hide
    beachbod , October 3, 2011 6:05 AM
    If you live in Alaska or Hawaii then Amazon > Newegg.

    How does it cost Newegg $16.38 to ship Battlefield 3 to Alaska when Amazon can do it for free?
  • 0 Hide
    kinggremlin , October 3, 2011 6:19 AM
    aaron88_7Free shipping through DHL which takes forever as is probably going to have a few bumps by the time it gets to your door.I'll stick with NewEgg, never had anything take more than 2 days to get to my front door.


    I'm not debating which is better, but I have never gotten anything from Amazon that was shipped by DHL, and I rarely pay for shipping on any of my orders. Arrival time varies, but is rarely more than about a week, and that is when the order is shipped ground across country.
  • 2 Hide
    demonhorde665 , October 3, 2011 9:54 AM
    sgtopmobilei am gonna be honest i prefer 10000 times buying computer parts in amazon than in newegg, i find better prices in amazon and all products sold by amazon itself has free shipping.



    what kind of asshole world do we live in where peopel thumbs down this poor guy for just stating his opinion of what store he prefers ???

    i shop at both amazon and new egg and ocasionally other web stores, for comptuer parts , it's new egg all teh wal , they got the best overall pricing and shipping. however Amazon is the shit when it comes to ordering books , games , and movies online (when i want physical copies) if i'm going digital games i shop steam. should i be blasteed for stated my opinon is that all three are great places to shop ??? No i don't think so, so give this guy a break , i'm gonna thumbs up him just to balance out you fanboys and haters.


    rember the old saying opinions are like assholes , every body has one
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