Amazon takes only slight loss on Kindle Fire

BY NATHAN OLIVAREZ-GILES
Los Angeles Times

LOS ANGELES — Amazon.com Inc. is taking a loss on each $199 Kindle Fire it sells, according to a report from the research firm IHS iSuppli that pegs the total cost to make each tablet at $201.70.

The Seattle-based retailer, which is making its tablet debut with the Fire, has been projected to sell between 3 million and 5 million before the year is done.

The Fire’s 7-inch screen is the priciest part of the device, coming in at a cost of about $87 per unit, IHS said. Supplying the displays for the Fire are LG, which also makes the Barnes & Noble Nook Color and Nook Tablet’s 7-inch screens, and E Ink, which produces the Kindle e-reader displays.

Texas Instruments is a major hardware partner of Amazon’s as well, making the Fire’s 1-gigahertz processor, IHS said.

“The TI OMAP4430 processor costs $14.65, accounting for 7.9 percent of the Kindle Fire’s total,” IHS said. “However, TI also supplies other devices, including the power management device and the audio codec. This gives TI a total of $24 per each Kindle, or 12.9 percent” of the Fire’s build costs.

IHS also said it has spotted the OMAP4430 processor in its tear-downs of the Research In Motion’s PlayBook tablet and the Motorola Droid Bionic and LG Optimus 3D P920 smartphones.

Amazon also saved money by not including items such as a camera, microphone, microSD card slot, HDMI port, 3G or 4G wireless radios and other features found in many rival tablets.

At $201.70, the Fire is cheaper to produce than the bestselling tablet on the market, Apple’s iPad 2, which has a production cost of about $326, according to an earlier IHS tear-down. Apple sells its base iPad 2 at a profit-making price of $499.

The research firm came up with its cost-to-build estimate based on taking the Fire apart and pricing out each of the components inside. In Amazon’s favor to help it recoup some costs, if the IHS estimate is correct, is the fact that the company is likely to sell books, music, movies, TV shows and apps to Fire owners.

And of course, as more devices are made, they often become cheaper to make, and Amazon already has said it will be building more Fire tablets than it had first planned.