updated 03:20 pm EDT, Wed April 22, 2009
Kindle 2 Cost Breakdown
An iSuppli cost breakdown today of Amazon's Kindle 2 reveals that the e-book reader ultimately costs a relatively small amount more to build than an iPhone, or roughly half the actual $359 price. Where an iPhone 3G cost $174.33 to make when new, the Kindle 2 costs $185.49 after factoring in both the raw parts as well as assembly. The most expensive component is E-Ink's 6-inch digital paper display, which by itself costs $60; the screen is needed both to provide a natural feel but to let users read even when the unit is otherwise powered down.
Next most expensive is a Novatel 3G modem that costs $39.50 and is needed for downloading books as well as receiving e-mail and websites. It notably supports the faster EVDO Revision A format. The actual processors themselves are relatively inexpensive: a Qualcomm cellular baseband chip costs $13.18, while Kindle's core processor is made by Freescale and costs just $8.64.
iSuppli is careful to warn that the analysis doesn't include other more hidden costs, such as licensing, marketing and software. Importantly, it also excludes the cost of 3G service, which is provided by Sprint for free. The study nonetheless implies that Amazon has built a significant amount of headroom into the cost of its device and is using a higher price, rather the carrier subsidies of the iPhone, to generate its profit.