Is Amazon really losing money on every Fire it sells? We mentioned an estimate putting the cost of its hardware at $250. Since then, I noticed another estimate putting it at $210, meaning a significantly smaller loss. Now, Light Reading suggests that the cost of the components of a Kindle Fire might be closer to $150, meaning Amazon can sell it at $199 and make a $49 profit.
Amazon cut costs on the hardware with its smaller screen size, by not including cameras or a mic, and by including half as much storage as the lowest-end models of both the PlayBook and the iPad 2. Connectivity is also a big cost to tablets as Amazon saves more than $20 by going Wi-Fi only.
The piece includes a table comparing price by component for the Fire, the Blackberry PlayBook, and the 32GB 3G iPad 2.
The article points out that even if Amazon were taking a loss on the tablet, it would still make it up on all the services and media that make up its content ecosystem. Apple already offers a similar ecosystem at premium prices, where other tablet makers have failed to make an impact, but Amazon is aiming at the lower end where it don’t have to compete directly with Apple.
TechInsight VP of Business Intelligence Jeff Brown says, “This is the first aggressive foray into the low end. And it will be hard for others to respond because Amazon has this media business.”
(Found via Gizmodo.)