Amazon selling Kindle Fire "at a loss"

by Nicole Kobie | Tuesday 4 October 2011

Amazon boss Jeff Bezos holding the Kindle Fire

Analyst firm shows bill of materials and manufacturing at $220.

Amazon is likely selling its Kindle Fire at a loss on hardware alone - before development, marketing and software costs are even considered.

That's according to a price breakdown of the tablet by IHS iSuppli, which predicted the bill of materials and cost of manufacturing at $209.63, with the device set to sell for $199 in the US.

Other analysts had estimated the device's bill of materials would be around the $150 mark, but it's worth noting that iSuppli's prediction is based on market knowledge - what it calls a "virtual estimate" - rather than an actual physical teardown, as the device hasn't started shipping yet.

Amazon is willing to settle for a razor-thin margin on sales of devices and digital content

The analyst firm said such pricing showed Amazon is "willing to settle for a razor-thin margin on sales of devices and digital content in order to achieve the larger goal of promoting merchandise sales at its online store".

While the plan to drive content sales isn't much of a surprise, the last time iSuppli did a price breakdown of an Amazon device - the second generation Kindle - the $359 price was almost twice the $185 bill of materials.

However, iSuppli believes Amazon won't make much money out of digital content either. "When further costs outside of materials and manufacturing are added in — and the $199 price of the tablet is factored along with the expected sales of digital content per device — Amazon is likely to generate a marginal profit of $10 on each Kindle Fire sold," the analyst firm predicted.

The analyst firm believes Amazon is simply trying to encourage customers to buy other products from its online store, saying "the real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content" but in physical goods sold via the website.

Price pressure

Regardless of the tight margins, iSuppli believes the Kindle Fire will be a success and could grab second place in the tablet market behind the iPad.

The Kindle Fire's budget pricing is already being cited as a reason for the BlackBerry PlayBook being cut by $200 at Best Buy stores in the US, with the HTC Flyer following suit with its own $200 price cut this weekend. However, both tablet makers could be also taking their cue from the HP TouchPad, which sold out after its price was slashed to £89.

See more about: amazon | kindle fire

Readers of this article also read...

Faster, lighter, more juice: meet 20 new laptops with Intel's new chip

amcmo 4 October 2011	Old news - Posted in the forum on Saturday. It does show that all other tablet makers other than Apple are going to have a munumental struggle on their hands. They cannot slash their pricing to compete with the Kindle Fire. Remember, all except Amazon have to cover their own margin, PLUS distribution and retailer margins. They can perhaps advertise greater compatibility with the Google App store if they don't fork their version of Android, however, even if they reduce pricing to $280-$300 or thereabouts for a 7", is the market going to go with them? 10"tablets obviously will cost more to manufacture and need higher pricing to make any profit. If you want basic and are happy at 7", you get a Fire for $100 less, more features and/or 10", unless you have a No Apple policy, you jump to the iPad. I and others have said before, there seemed to be no tablet market at this stage, just an iPad market. With the Fire, it's turned into a 2 horse market. I still don't see others getting enough traction to warrant the investment. Comment made about the PC & Tech Authority article: Amazon selling Kindle Fire "at a loss"? Analyst firm shows bill of materials and manufacturing at $220. What do you think? Join the discussion. Edited by amcmo: 4/10/2011 09:44:50 AM
ory_zm 4 October 2011	Personally, I'm waiting for Win8 tablets to see what happens before I commit to any platform or vendor (I do unfortunately have a No Apple policy :-p) I mean, I don't even really need a tablet, so I don't mind waiting on the side lines.
amcmo 4 October 2011	I see Win8 tablets having the same problem. Cost will be similar or more than iPad with the M$ licence fee plus similar hardware, so not cost savings there. Starting from a substantial disadvantage in apps. OK, stands to have more standard ports, though with adapters you can get almost any connection with the iPad and keep the sleek form factor.. Given that there is such a lack (currently) of viable competition, why would you go No Apple and lock yourself out of possibly the better product. Smacks of 'cutting off your nose to spite your face'. Plenty of 3rd party hardware, apps on the App store. So they impose some controls and make certain you're not infested with malware. I'm not after a tablet as such currently, but will be getting a Kindle Touch as soon as available in the US.
ory_zm 4 October 2011	amcmo wrote: I see Win8 tablets having the same problem. As? Quote: Cost will be similar or more than iPad with the M$ licence fee plus similar hardware, so not cost savings there. Starting from a substantial disadvantage in apps. OK, stands to have more standard ports, though with adapters you can get almost any connection with the iPad and keep the sleek form factor.. Really? How do you connect a normal (USB) keyboard and mouse? Disadvantage with apps, but you have all x86 software available to you... And on such a mainstream platform I'm pretty sure the apps disadvantage would shrink very rapidly. Quote: Given that there is such a lack (currently) of viable competition, why would you go No Apple and lock yourself out of possibly the better product. Smacks of 'cutting off your nose to spite your face'. Well I suppose that I had an iPhone 3G for 2.5 years and now that I have escaped (or feel that way anyway), I do not feel rushed to put myself back in prison so to speak. I like controlling my hardware and will not cede that control over easily (again) without a really good reason - an iPad does not qualify there for me. I do not feel a pressing need for a tablet anyway, for me what I'm interested in is really more a laptop replacement with a slimmer form factor and portability. I already have a good phone that I can do light browsing/apps etc. in a satisfactory manner. I have a Kindle to read books, and even if not I can't see my self reading a book on a LCD screen. I have a WD TV to stream stuff to my tv. I have a PS3 for gaming and a PC for any heavier duty computer work as well as gaming. What exactly am I missing out on? So the only thing I would change is the usage of the laptop in the living room or kitchen for what I would have to call medium browsing (too much for a phone, but not enough to justify going to the computer for) - actually make that medium computer usage. I do that now on a MS Win platform, and can't imagine that changing, I like my software too much! So until Win8 it is for me, and if it is not good, oh well, I still have my beloved laptop :) Quote: I'm not after a tablet as such currently, but will be getting a Kindle Touch as soon as available in the US. Yes if I did not already own a Kindle 3, a Kindle touch might be of interest... Especially since it costs less than what the Kindle 3 costed me merely 6 months ago.
amcmo 4 October 2011	AS - The same problem as every would-be competitor so far, as outlined in the second sentence. If you want a keyboard and mouse get a MacBook Air or Ultrabook. Just a Keyboard, any one of the bluetooth keyboards available. Why would you buy something as portable as a tablet then restrict it with a wired keyboard. With touch interface where's the benefit of a mouse? A win8 tablet will not be able to run most x86 software from reports so far. In fact you'll only be able to get apps for the tablet from the M$ app store if reports are correct. The Win8 tablets will only become mainstream if they can generate sufficient sales, which is far from assured. Control your hardware. Most notebooks are not user upgradeable with possible exception of additional memory or hard drive in some. Which by the way I am assured you can do on MacBook Pro, and upgrade the SSD on the Air, so no difference in your ability to control the hardware? Want a desktop that's very upgradeable, get a Pro with benchmarks around double those of an i7 PC. Info provided by our in house Apple fan with a Geekbench graph. We now have 8 Touches on order for staff and families.
blockcentre 4 October 2011	amcmo wrote: Want a desktop that's very upgradeable, get a Pro with benchmarks around double those of an i7 PC. Info provided by our in house Apple fan with a Geekbench graph. Are you honestly comparing benchmarks between a Macbook Pro and an i7 desktop? Or are you comparing a MacPro to an i7 desktop? Either way, surely you're having a laugh? The MacPro runs old Nehalem processors and the Macbook Pro is limited by the mobile architecture. There's no comparison. Edited by blockcentre: 4/10/2011 08:54:50 PM
rubaiyat 4 October 2011	These benchmarks might be useful: http://www.cpubenchmark.net/high_end_cpus.html
amcmo 5 October 2011	Comparing a current Mac Pro fully juiced. Despite it being a generation old on the CPU, with however many cores it has (12 or 16, he's not in today so can't confirm) the Geekbench was 24+K and the i7 2600K was 12500 or thereabouts. So it is a valid comparison, though not strictly Apples and Apples. Yes to a certain extent I was taking the P..s. Here was the usual, 'can't change anything on a Mac' excuse for supposed PC superiority and I was giving an admittedly extreme example. If you want to tinker, get a Mac Pro and juice it and see what you can achieve, at a cost.
rubaiyat 5 October 2011	That's why I'd love to set up real world tests. Both sides of the divide keep flexing their muscles and posing in their corners whilst avoiding the centre of the ring where they can really go mano a mano. I do however keep getting feedback from people I know doing big grunt work like video etc that despite the Mac Pro's older hardware it does more than keep up where it counts. Keep in mind that the Mac Pro is the one piece of hardware that Apple has not refreshed in a long time. It is probably the next thing to get a major refresh. amcmo This is one area though where I'd give Apple a miss and get your geeks to build their own Hackintosh. Pay for the OS but tune their own hardware. They could use the excellent Mac Pro case as the starter. I've been eyeing off old G5 Power Mac cases that you can get fairly cheap.
amcmo 5 October 2011	Rubaiyat, Strange you should say that, I know where there's an empty 2009/2010 Mac Pro case... I believe it may be for sale. We sell sliders to fit 2.5" SSD's in the drive slots for that model case (and the SSD's of course). Personally I like the Lian Li alloy cases - one on my desk Win7. Of course a 'Hack' is against the Apple licence I'm sure, though our Apple 'guru' did show me a PC he built for himself that was not running Windows.
rubaiyat 5 October 2011	If you don't want the case, I'll have it. Price being right of course,
photohounds 5 October 2011	Hackintosh - I like the name and I like the concept too. You should NOT be limited as to what you can run Apple OSs on. Control of the software, hardware OS and applications = monopoly. Anti-trust actions were taken against IBM and M$, rightly so and when they were at the HEIGHT of their power. That's part of the 'concern' over Google buying Motorola mobile. If Google can't determine what you can run an OS on, then neither should ANYONE else. Does anyone have a clue as to how the Big A escapes risking anti-trust action for this behaviour? PS AM, is that the case with the rounded 'handles', top and bottom, mesh at the front? If so buy, buy, buy, they are superb inside and out. Edited by photohounds: 5/10/2011 12:02:20 PM
rubaiyat 5 October 2011	photo Is this honestly the first you have heard of Hackintoshes? amcmo Is the the Lian Li you are referring to: http://www.lian-li.com/v2/en/product/product06.php?pr_index=208&cl_index=1&sc_index=25&ss_index=61&g=spec It looks a bit of a sow's ear but functional. For those of you who know not of which we speak: Like most things Apple turns its hand to, it is just art, very functional art. Edited by rubaiyat: 5/10/2011 12:25:22 PM
amcmo 5 October 2011	It's the mesh front, with Apple protective film still on the sides. Understand it's available for sale as a standard AT Mobo doesn't fit, you have to cut out a slot in the bottom if I remember the discussion correctly. The reason why Apple are not the target of Anti-Trust is that they make up 8-10% of the world PC market, therefore no loss of choice. Google would equally be able to only supply current versions of Android to Moto, forcing other Android licencees to run 1 vrsion older. Again, their percentage of the market would be low enough to not run into anti-trust. That's why some Android mfr's are quietly panicking.
amcmo 5 October 2011	http://www.lian-li.com/v2/en/product/product06.php?pr_index=393&cl_index=1&sc_index=25&ss_index=62 Agreed, it's not Apple 'art' however as PC cases go it's functional, alloy, so lighter, strong, slide out drives etc. I have an older version at home that also has a slide out Mobo tray so you can build and test the pc before sliding it into the case.
photohounds 5 October 2011	rubaiyat wrote: photo Is this honestly the first you have heard of Hackintoshes? I'd heard the term Ruby, but never delved. Looks RIGHT up my alley =p~ Yep that's the box ... I have used machines with these cases, it was like walking up to your Porsche when you looked at the other's heaps :) AM, might as well go USB3 if Apple supports it - Lian-Li LL-PC-7FNWXB Exploring all options as a maker does not really equate to "panicking", not until we see fire sales. Edited by photohounds: 5/10/2011 12:54:00 PM
rubaiyat 5 October 2011	amcmo How do I go about getting the case? Please send me a private message. Thanks. :)
photohounds 5 October 2011	rubaiyat wrote: amcmo How do I go about getting the case? GOOD move, Ruby! Have fun, will you Hackintosh it? Edited by photohounds: 5/10/2011 12:56:33 PM
rubaiyat 5 October 2011	photo Couldn't find your refernce on their site, did you mean the: Lian Li PC-7FNWZ
photohounds 5 October 2011	PM Edited by photohounds: 5/10/2011 12:59:21 PM
amcmo 5 October 2011	To both of you, yes, Lian Li PC-7FNWZ is the version I have, with USB3. Gigabyte Z68 Mobo, though on reflection, I prefer the ASUS P8Z68-VPro UEFI board in my home beast. Rubaiyat, PM'd on the case. Edited by amcmo: 5/10/2011 01:06:44 PM
rubaiyat 5 October 2011	photo If I can make it financially make sense:
amcmo 5 October 2011	I'd go W7 SSD,OSX SSD, Win Data, OSX Data. Have an XP box we remote into for one app that only runs there. I noticed this one on the LianLi site, think it will be good for the next box. http://lian-li.com/v2/en/product/product06.php?pr_index=574&cl_index=1&sc_index=25&ss_index=62&g=f Esp like the carrier for 2 x 2.5" SSD. Rubaiyat, you've got me thinking. Quick text to the OSX guru and was pointed to a certain site. Seems both the ASUS and the Gigabyte boards I have are a cinch for OSX Lion install and multiboot......
rubaiyat 5 October 2011	Yes both those support EFI boot. I'll do dry runs on costings, give it a little time to see if Apple updates the MacPro and Intel motherboards to come out with Thunderbolt support. Have contacted your link for the MacPro case. Thanks very much for that. :) photo and I have also chatted, turns out we are practically neighbors. Have to be much nicer to him or I'll get a brick through the window! But that will take all the fun out of these forums. :) Geez! Had a thought! Hope he's not my brother-in-law! :) Edited by rubaiyat: 5/10/2011 02:32:31 PM
amcmo 5 October 2011	Now this is getting far too civil! So many posts this morning and not an insult to be seen. I think I need to go beat one of the staff, get rid of the tension...:d Sandybridge Xeon in Feb/March, Thunderbolt support... There's a thought.
photohounds 5 October 2011	Subsidising an electronic device with expectation of future earnings. Shame on Amazon - who else would do such a dastardly thing? Nice, bit a pity it uses a backlit screen to keep up with the jonses, even if it IS good quality. The monochrome ones will always be easier on the eye for the long read, my reading friends agree with me. BTW: most tablets are used to consume, rather than create, I'll wager and this will be no different. Unless you use products like ... http://www.dpreview.com/news/1110/11100315adobephotoshoptouch.asp
amcmo 5 October 2011	That's why I'm getting the Touch as are family, friends, staff. Going to end up being a big box of Touches from our US office. There are some pubs that could be good in colour, however for time being, b&w seems fine.
rubaiyat 5 October 2011	amcmo Methinks you are confusing the iPod Touch with Photoshop Touch which is Android software.
amcmo 5 October 2011	Sorry, Kindle Touch!
photohounds 6 October 2011	All very 'touchy' here ... Photoshop, ipod, kindle ,, Sad biz re Steve ... still, longevity aside one can't say he missed out on making the most of his life.
ory_zm 6 October 2011	BTW the comment that sparked this whole conversation ("I want to control the hardware" ) was not actually meant in that way.... :lol: I was talking about iPads (I can't see myself buying an Apple notebook if only because I can't figure out OSX.. was looking at them about 2 years ago but what you were getting for the money was not worth it. I understand things have changed now, and especially the air looks like an amazing piece of tech). And when I said I want to control the hardware, I did not mean the customisation of the hardware, I just meant that when I purchase a device, I believe I own it and can do whatever I want with it. Therefore I'm totally against the approach Apple (and Sony for that matter) have taken against Jail Breaking. It shouldn't be that hard to load custom ROMs into a piece of hardware (that I own). When I say I'm against it, I don't mean I don't understand why they are doing it or that they shouldn't do it, just that it stops me from purchasing it. ;) Edited by ory_zm: 6/10/2011 05:12:58 PM
photohounds 6 October 2011	Interesting stuff I didn't know. The first, 5MB iPod debuted on October 23, 2001 and could hold 1000 songs. It was coupled to iTunes software, itself based on code bought from SoundJam MP, a popular third-party music player software, that Apple released about eight months before. The Apple Store commerce component was added about two years after the iPod. By combining these three elements - incidentally, a cornerstone of Samsung's strategy a few years before - Jobs had learned a lesson from an earlier time when he refused to licence the Mac graphical operating system a decision that opened the door to upstart Microsoft to dominate the nascent PC industry. http://www.itnews.com.au/News/275890,vale-steve-jobs-worlds-greatest-failure.aspx So, ipod might have been the raving success but ... *Learning from your mistakes is good practice, learning from the mistakes of others is comparatively painless* :o