Amazon Kindle Smartphone Arriving Next Year?

Citigroup's research department claims that an Amazon smartphone may hit the market in Q4 2012. The news arrives by way of Citi's Taipei-based hardware research analyst Kevin Chang who in turn received his information from "supply chain channel checks in Asia."

Chang reports that Amazon is jointly developing a smartphone with Foxconn. The online retailer will reportedly pay non-recurring engineering fees to Foxconn even though the device and its multiple components will be manufactured by Hon Hai's TMS business group (the same one behind the Kindle e-readers and Kindle Fire).

Sources claim the upcoming smartphone will feature a Texas Instruments OMAP 4 SoC which is also used in the Kindle Fire. There's also a good chance the device will sport QCOM's dual-mode 6-series standalone baseband given that the company is a long-time baseband supplier for Amazon's Kindle e-reader devices.

"With the clear success of the Kindle e-Reader over the past 3 years, and Kindle Fire possibly succeeding in the low-priced Tablet market, we view this as the next logical step for Amazon," Citigroup reports. "We continue to believe Amazon has now set its eyes on the Mobile (and Tablet) Media and Product consumption frontier."

Citigroup said it also believes the smartphone will be a mid-end device due to the OMAP 4's age at the time of the phone's eventual release. "While OMAP 4 is mainly used in high end models right now, TI's OMAP 5 (ARM Cortex A15, 2 GHz dual core) launch in 3Q12 will likely knock OMAP 4430 (ARM Cortex A9, 1.2 GHz dual core) to the mid end segment in 4Q12," the firm added.

According to Citigroup's estimates, the phone will presently cost Amazon between $150 to $170 to create. However, because Amazon doesn't need to make money off the hardware, it will be able to sell the phone to carriers at cost in 4Q12. Most handset makers like HTC typically sell their device to carriers with a 30-percent gross margin.

"If Amazon is actually willing to lose some money on the device, the price gap could be even bigger," Citigroup said. "Besides Amazon, Xiaomi Tech is also selling a handset with compatible spec to HTC Sensation at around US$317, which is roughly where the overall cost is."

To read the full report, grab the PDF file here. As of this writing, Amazon has not released a statement in regards to these claims.