updated 07:30 pm EST, Thu November 17, 2011
IHS iSuppli delivers final Kindle Fire cost study
IHS iSuppli revised its earlier cost breakdown for the Amazon Kindle Fire to a lower figure in a more final estimate that showed Amazon was still taking a loss on each device sold. While it's now expected to cost just $201.70 to make, that still told AllThingsD the $199 Android tablet was losing Amazon money on each sale, even before factoring in shipping and other costs. A look at the final product showed that there were cost savings even beyond what had been expected, including on the inside.
Instead of a regular wireless module, it was using an all-in-one wireless chipset from a small company named Jorjin that was saving a few dollars. The touchscren controller was from an equally unfamiliar company named Ilitek. By choosing the TI OMAP4430 processor, seen in the several months old BlackBerry PlayBook, it was also counting on the $25 in combined chips from TI dropping to a $12 price in the near future and making the Kindle Fire more profitable.
Even the minimalist cardboard packaging may have saved Amazon $2 to $3 in manufacturing, researchers said.
Amazon has always made clear that the Kindle Fire would follow a game console-like model for profit, where the hardware is sold at break-even or a loss and the content turns a profit. Every buyer gets a trial account for Amazon Prime, and services like unlimited subscription streaming and book borrowing are meant to steer users into paying $79 each year. Normally, apps have to go through the Amazon Appstore, further taking a cut every time a user gets a paid app.
The price differences are intended both to stay competitive with the Nook Tablet but also the iPad. Creating as much of a price gap as possible reduces the likelihood that a potential buyer might pick the $250 Nook Tablet or $499 iPad instead.