IHS iSuppli: Kindle Fire is worth $191.65 in parts

Surely, at $199, the upcoming Kindle Fire can’t be much of a cash cow for Amazon. Or can it? IHS iSuppli has put together an estimate of the device’s bill-of-materials cost, and it reckons that the device is worth $191.65 in parts, or $209.63 once you factor in "manufacturing expenses." That suggests Amazon will be selling each device at a slight loss. There is a twist, however, as the research firm explains:

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.
However, 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. Amazon doesn’t make a substantial profit on sales of Kindle hardware and content such as e-books and music. Instead, the Seattle-based online-retail giant generates its profits on sales of shoes, diapers, and every other kind of physical product imaginable. Similar to Walmart and other large brick-and-motor retailers, Amazon’s content business is designed to lure in consumers to buy such everyday goods as well as other money-making items.

IHS iSuppli goes on to note that Amazon’s business model—peddling cheap hardware and offering access to media in order to draw customers to its retail business—is "unique" among makers of tablets and e-book readers. The research firm also believes that the Kindle Fire has the potential to become the second-most popular tablet behind the iPad. (That title would only apply in the United States, of course; Amazon hasn’t announced plans to release the Kindle Fire elsewhere.)

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    • fredsnotdead
    • 8 years ago

    “large brick-and-motor retailers”

    My local Walmart does have an auto-service department…

    • kamikaziechameleon
    • 8 years ago

    The fire not featuring a 3G option is somewhat of a change in the direction of the kindle plan.

    • kamikaziechameleon
    • 8 years ago

    I’m sold I love companies that use such great A symetrical business models. Valve, amazon, google They are paving the way of the future for business models where consumers don’t pay for goods or services but rather the companies that access their consumers pay that fee for the consumers. Its genious and I’m genuinely surprised that companies like microsoft, sony, ninendo and apple still struggle to realize how they need to alter their game plan.

    • dashbarron
    • 8 years ago

    I’m no great prophet like Neely, but I saw this coming a mile away. As long as Amazon can sell a good, cheap device, their services and other products will make the money.

      • ew
      • 8 years ago

      Unless the device isn’t any good and people end up unhappy even paying $200 for it.

        • Vulk
        • 8 years ago

        Do you have any evidence to indicate that that’s the case?

          • ew
          • 8 years ago

          I never said it was the case. I was speculating.

        • dashbarron
        • 8 years ago

        Assuming consumer response and what I’ve seen of the Kindle’s thus far is the same or better, this should be a stellar, knockout hit for $200.

        • willyolio
        • 8 years ago

        “they will make money if they can sell a good device unless the device isn’t any good”

        OMG you just taught me modus ponens!

    • PeterD
    • 8 years ago

    So, the actual function of the Kindle Fire is to destroy printed books, at whatever costs?

      • yogibbear
      • 8 years ago

      How else do you think they came up with the name?

        • Bauxite
        • 8 years ago

        First book to read on it:

        Fahrenheit 451

      • Grigory
      • 8 years ago

      Yes, as the function of the car is to kill horses.

        • Farting Bob
        • 8 years ago

        I hate pens because it killed off the Quill industry.

      • Vulk
      • 8 years ago

      Good riddance.

      • willyolio
      • 8 years ago

      actually, it’s to promote fireplace usage.

    • Johnny5
    • 8 years ago

    I’m not in the market for such a device. Still, hurray for low (even negative) markups.

    • Bensam123
    • 8 years ago

    One of the main draws I saw in the kindle was the e-paper display. If you’ve never actually see this sort of display, it almost looks identical to paper itself (very close). I think that was a huge separating point… now it just sort of looks like a glorified smartphone or tablet. I think they slipped themselves into a completely different category with the fire and it’s not going to turn out well. The subsidized cost of it through eventual purchases is one of the few things going for it IMO.

      • kalelovil
      • 8 years ago

      People shouldn’t down-vote a perfectly reasonable opinion just because they disagree with it.

        • NeelyCam
        • 8 years ago

        You must be new to the TR discussion threads.

          • MadManOriginal
          • 8 years ago

          Or perhaps new to the internet as a whole?

        • Bensam123
        • 8 years ago

        I made a deal out of people just being douchebags so now I have trolls that follow me around and downvote anything I write. I thanked SSK in a different thread and got a -1 for it.

        It’s just people being anonymous dicks as per usual online. I originally made a point of it because it had to be made… it’s not healthy for a community when people can make roaming parties to assert power over others. Not necessarily because a -1 will ruin someones life, but because continued abuse of the system wont be good for anyone. It’ll end up in the same category as dig bury brigades.

        I guess it’s just more proof that some people should never be allowed to have power over anything.

          • MadManOriginal
          • 8 years ago

          -1’d you just to back up your point. lol!

          • yogibbear
          • 8 years ago

          If I get -1’d I’m gonna have to JUMP!

          • ImSpartacus
          • 8 years ago

          No, it just shows that we need each other in the right amounts to function correctly.

          Get too much exposure and you’re a politician, too little and you’re /b/.

          Some people think they can deny it (hipsters), but then those people (i.e. not individuals) just turn into another group and start it all over again.

      • willyolio
      • 8 years ago

      you get my downvote for stating an uninformed opinion. you do realize they released, like, 4 other kindles that use e-ink, right? If you want e-ink, you don’t have to look very far. They’ve pretty much got all e-ink bases covered.

      and there IS a market for e-books on colour LCD screens. In fact, i’d wager it’s even bigger than the e-ink market. The Kindle Fire is exactly what they need to sell more e-books- a cheap colour tablet that’s big enough to read like a book and small enough to be portable. Amazon is in the e-book business, not the e-ink business.

        • defacer
        • 8 years ago

        [i<]Uninformed opinion[/i<]? The guy's opinion is that: 1. (One of) the main pros of the Kindle is the e-ink display. 2. The Fire is a completely different type of device. 3. The Fire will not turn out well for Amazon. I think pretty much everyone would agree that 1 and 2 are self-evident. As for 3, I think it's a false prediction with no arguments to back it up, probably based on the poster's concern that Amazon might shift its focus to less reading-friendly devices and fueled by psychological factors. Where did he say that his problem is that there's no e-ink to be found? Personally I find it totally shortsighted, if not dishonest, on your part to imply or assume that the guy is not smart enough to find out that two different e-ink devices were announced the same day as the Fire. Where did he say that there's no market for color LCD readers? Did you consider the possibility that the second half of "the Fire will not turn out well because it won't sell" is your own mistaken assumption over the original statement? And finally, the very article quoted in Cyril's post seems to say that in fact Amazon is also not in the e-book business, but simply use it as another angle from which to lure customers in to their consumer good business. Not to mention that IIRC from the Fire press releases, that device is more targeted towards consuming music and videos instead of ebooks. I normally don't waste time dissecting people's uninformed opinions on the net, but you calling another on this just struck a nerve. Constructive criticism always welcome.

          • Bensam123
          • 8 years ago

          Yup… for some reason your comment wasn’t there when I posted, but all of the above is pretty much the summation of what I wrote below.

        • Bensam123
        • 8 years ago

        What is uninformed about it? We’re talking about the Kindle Fire…

        There IS a market yes, my point being they had their own little niche with e-ink devices. The kindle fire is their new top of the line model. It changes how people perceive them when they start pushing color displays that look remarkably similar to their iPhone or HP Tablet. If you want to take that a bit further, I’d even wager that this being their top of the line model would indicate the direction they’ll eventually go with all their Kindles. I’m sure they’ll still have the traditional model, but this taints the image of what a kindle is.

        I would very much argue that the little niche they developed is solely because of their e-ink display. That alone is what sets them apart from every other doodad and gizmo on the market.

        If you haven’t seen what a e-ink display looks like, you should go to your local store and take a look at a kindle. They look nothing like tablet in terms of display. I almost picked one up merely because of the ridiculously clean looking display, unfortunately I don’t read enough books to justify it.

          • willmore
          • 8 years ago

          Don’t they have a video service? IIRC, e-ink doesn’t exactly do motion (or color), right?

          My concern is that ordering stuff on Amazon might not be enough of a feature to really sell the fire. Then again, Amazon seems to be able to make money with everything they do, I highly doubt that they just blundered into a market without thinking *very deeply* about it before hand.

          FWIW, I don’t downvote comments with which I disagree, I downvote ones which show poor logic or behavior. So, I didn’t downvote you.

            • Bensam123
            • 8 years ago

            Yup, eink is bad for media.

            I agree they probably have a lot of R&D on board, but sometimes the most logical answer isn’t always the right one. I’m sure the logic they used, which does seem sound, is if they have a very nice looking device that looks like everything else, they can nab part of that market pie, but that doesn’t take into account what separated them from their peers in the first place or how people view them as a whole before and after.

            I mean the most logical step for their evolution is stepping into the tablet market and adding a color screen, being able to show media, expand their devices capabilities, do the whole Apple app store thing, and turn into a huge success, right? Just like Origin is going to take off and compete full on with Steam. How they’re perceived is worlds apart though.

          • Peldor
          • 8 years ago

          It’s incredibly shortsighted to think that after tens of millions of installations of the Kindle app on color phones, color tablets, color slates, color PCs, color refrigerators, color this, color that, and color the other, that Amazon is seriously undermining their brand just now by offering their own color device.

          uuuuuuuuu (<— cut and paste for the Queen’s English readers)

            • Bensam123
            • 8 years ago

            So you don’t think the eink display has anything to do with the Kindles success?

          • willyolio
          • 8 years ago

          and they have that niche COMPLETELY FILLED UP WITH 4 E-INK KINDLES.

          that niche does not encompass the entire e-book market. Amazon is in the e-book market, not the black-and-white e-book market, not the e-ink market, and not the tablet market. Did you even read the article? They will make money off of e-books, not the tablet itself. selling an entire lineup of products that can display all their e-books they have on catalogue is a very good idea.

          trying to stick inside a niche that is growing smaller is not good business. you’re just whining because people prefer colour screens and you’d rather Amazon die slowly by not giving consumers what they want, propping up your (personally) preferred technology instead of shifting along with the market demands.

            • Bensam123
            • 8 years ago

            I did read the article, you are completely mistaking what I’m saying. My entire post was based around how they are viewed on the market, not where they’re attempting to situate themselves in it. As Geoff or Scott once wrote in one of their articles, it’s all fine and dandy if a company wants to put a product in a specific spot on the market, but that doesn’t mean consumers need to use it for that exact purpose or look at it for exactly that need.

            What you’re arguing is worlds apart from what I’m arguing. I never stated that they wont sell their products as defacer wrote. None of what I wrote is contradictory to what you’re saying.

            You think the ebook market is failing? citation?

            On the contrary. I think Amazon is hurting themselves by putting their products in line with what the rest of the market is doing, as I wrote in my last two posts. Why would I want amazon to fail?

            Like I wrote before, what will separate their product from the rest of the market? Why do people buy iPads? Why will people want this model over say a $100 HP tablet? They’re putting themselves in a category where they WILL be directly compared to their competitors. The original Kindle had it’s own little category

            In order for people to think something is great or amazing, it has to be seperated out from the rest of the pack. This doesn’t just apply to products, this applies to individuals in real life. Everything gravitates towards the mean because it’s easy and when it does it’s pitted directly against everything else around it. Unless you have a quality that separates you out from everything else, you’re setting yourself up to fail. It’s not just about a little niche, it’s about differentiation.

            Like I said in the original post, the only thing that sets Kindles apart from everything else is its e-ink display and in the case of the fire, that they’re subsidizing it.

            If you want to look at uninformed, your posts are rather uninformed as you lightly skim what I’m posting and make up the rest on your own.

            • willyolio
            • 8 years ago

            *facepalm*
            you know what? just read my above post one more time.

      • Farting Bob
      • 8 years ago

      Right, but this isnt an ebook. Its a tablet PC. They also announced ebook devices which are even cheaper and come with a greyscale e-paper display. You are comparing 2 different things. Would you complain that a new phone isnt as good as your laptop?

        • Bensam123
        • 8 years ago

        It’s called a Kindle and they’re marketing as such.

        What separates a Kindle from a smartphone or a iPad? Just calling it a e-reader because they do doesn’t justify it’s form or functionality. You can look up books on your smartphone which is roughly the same size…

        A bigger display for books would be better… why do you think Kindles are so small? They fit neatly in between the space of a tablet and a smartphone…

          • willmore
          • 8 years ago

          It’s called the Kind Fire. The first Kindle to get a real name 3G and DX aren’t really names. That seems to me like at least the attempt to differentiate it from the rest of the e-ink part of the Kindle family.

          Which ‘Kindle’ are you refering to in your iPad comments? The e-ink line or the tablet line? If it’s the ‘Fire’, then I’d say “About $400.” And, if you already have a smart phone or iPad (or some other similar device), enjoy it. I’m not sure of the exact market numbers, but I think there are people left in the world who don’t yet own an iPad or smart phone.

          The reasons the Kindles are the size they are is because they’re meant as book replacements and they can’t afford to be much larger than a book–in the case of everything but the DX, that means a paperback or small hardcover. I understand your felling that a larger display would be nice, but I’ve been reading books on small screens for years and you learn to stop expecting to move your eyes and to move the page instead. It takes some getting used to, but it works just fine. I’ve got a Palm Pilot 128K (since modded to 512K) with a burnt out backlight that’ll testify to that.

            • Bensam123
            • 8 years ago

            It’s not just a name, it’s how they’re comparing it and marketing it. If they wanted to make a completely new product they should name it something differently, instead they’re toting the Kindle Fire as their top of the line model. That it’s a Kindle and more… They make it seem like it’s the next evolution in Kindle readers… but when you look at the thing, all I see is a iPad.

            They can say it’s a ereader all they want, but you can read a book on a smartphone or a tablet (that’s one of iPads touted features). That little book size, clean looking, minimalistic technology look is being thrown to the side

      • PeterD
      • 8 years ago

      It will cost them money, but not very much.

    • demani
    • 8 years ago

    It is unique among tablet makers, but its the same model cell phone carriers have been using for years. And Gillette.

    It’s just amazing that they not only get the ecosystem benefits for this kind of device, but they went all in with the cheap tablet cost to boot. They’ve got a rough road, but the price will bring in a lot of people.

      • Bauxite
      • 8 years ago

      I’d love to see preorder figures so far, anecdotally it seems everyone I know either got one or is seriously considering it. iSuppli and others confirm first impressions by many, its a damn good buy at $200.

        • Omniman
        • 8 years ago

        I for one just pre-ordered it today! I was going to get a nook color but this is cheaper and no need to be modified 😀

      • DancinJack
      • 8 years ago

      I think they said just under 100K on the first day.

        • Peldor
        • 8 years ago

        A 3rd party email marketing company estimated 95,000 the first day, but Amazon is unlikely to comment until they hit a major milestone/goal.

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