In A new report from IHS iSuppli states that the new tablet PC from Amazon, the Kindle Fire, costs $209.63 to make. IHS iSuppli said the components that go into the Kindle Fire cost $191.65. Additional manufacturing expenses bring the total cost to $209.63. Amazon is planning to sell the device at $199, so based on IHS iSuppli's estimates the company may lose just under $10 on each Kindle Fire that it sells.
Amazons low price for its tablet has sparked concern about a price war at the lower end of the tablet market, currently dominated by devices running on Google Inc's Android operating system from companies such as Samsung Electronics Co Ltd, Motorola Mobility Holdings Inc and HTC Corp. Most analysts are of the opinion that the Fire will not have any significant impact on iPad sales. An Amazon spokesman did not comment on IHS's estimates on Friday afternoon.
"The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content. Rather, the Kindle Fire, 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," IHS iSuppli said in a statement. Amazon is hoping the device encourages users to buy more products and services from the company, making up for the upfront losses.
"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 research firm added. Doubts have been expressed about how likely the Fire users will be to buy a lot of Amazon's digital music and video with their new device. Even iPad users dont buy too much of music and video from Apples stores.
So far, tablets are mostly using their devices to access video games such as Angry Birds and for downloading other apps, and that is where Amazon has the best chance to recoup some of its upfront losses on the Fire.
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