Amazon is losing $50 on each Kindle Fire it sells! No, wait—it’s only losing $10! No, wait—it’s making $50 on each device! No, wait—it’s actually losing $2.70!
That last is the latest word from IHS’s iSuppli Teardown Analysis Service, which has ostensibly priced each component plus manufacturing costs and come up with a total of $201.70 for the $199 device. Does anyone even believe these estimates anymore?
It would be interesting to compare the various different teardowns on a spreadsheet and see how each one priced each component. (I’d do it myself, but I don’t have time right now.) As I’ve said before, I don’t think we’ll ever really know what Amazon’s profit or loss margin really is on the Kindle Fire. Only Amazon knows exactly how good a deal it was able to make for each part, and it’s never going to tell us.
Maybe Amazon is losing a little bit of money on each one, or maybe it’s making a little bit of money on each one. My own suspicion is that Amazon is selling it more or less exactly at cost, give or take, because all the content the owners are gong to buy over the next few years is where Amazon’s real revenue will come from. If Amazon does lose $2.70, or even $5 or $10 on every purchase, but gain hundreds of dollars in profit down the road, it seems like a reasonable investment to me.
Also, as more devices are manufactured, the price per unit will inevitably fall due to economy of scale and improved efficiency in the manufacturing process. (That’s at least part of why Amazon has been able to reduce the price of the Kindle by a couple of hundred dollars since it originally debuted.) Amazon could be counting on that to help even up the score over the next few months.
(Found via Gizmodo.)
