x PhoneArena is looking for new authors! To view all available positions, click here.
  • Home
  • News
  • Amazon selling Kindle Fire at $10 loss for each unit sold

Amazon selling Kindle Fire at $10 loss for each unit sold

Posted: , by Alan F.

Tags:

Amazon selling Kindle Fire at $10 loss for each unit sold
Last week, Amazon announced that it would sell its 7 inch Wi-Fi only tablet, the Amazon Kindle Fire, for $199.99. Many have speculated that Amazon is willing to take a loss on each tablet it sells, planning on making up the difference by selling tablet owners apps, content and cloud based services. But the question, is just how much of a loss is Amazon taking on each unit sold? Gene Munster, a Piper Jaffray analyst, calculated that the deficit is $50 for each Kindle Fire sold, but according to a breakdown of the tablet by IHS iSuppli, that estimate is way too high.

The component costs of the Amazon Kindle Fire

The component costs of the Amazon Kindle Fire

Working off a list of known and expected components, IHS iSuppli figured that each Amazon Kindle Fire cost $209.63 in parts and assembly meaning that Amazon is taking about a $10 hit on each tablet it sells, which sounds like a number easily made up by offering users other Amazon provided features. After all, a 1 year subscription to its Prime service costs $79 alone, for unlimited streaming movies. Just about every movie watched or note heard by a Amazon Kindle Fire user will come through the manufacturer.

As for the tablet, the most expensive part of the device is the LCD screen priced at $87 and the dual-core TI processor and other components to its mainboard added up to $70.40. IHS iSuppli figures that after selling users the content and other services, Amazon is actually turning a $10 profit on each tablet sold. And with the $199.99 price of the 7 inch device, you can expect that the Amazon Kindle Fire will be one hot-selling product this coming holiday season.

source: IHSiSuppli via electronista

18 Comments
  • Options
    Close




posted on 01 Oct 2011, 15:35

1. dacastrator (Posts: 232; Member since: 22 Sep 2011)


Sure the price is jaw-dropping. But that's what will happen if you try hard to be revolutionary. Or atleast different. Other 7 inchers are roughly $300. Not so clever Amazon.

posted on 01 Oct 2011, 17:26 3

8. Lucas777 (Posts: 2121; Member since: 06 Jan 2011)


i agree witht he fact that 7 inches is bad... but the price point is good... personally i think amazon could take a further price cut.. think about how much marketing this will get being on the fron page of amazon every day

posted on 01 Oct 2011, 17:28 2

9. oddmanout (Posts: 435; Member since: 22 May 2009)


You all talk like Amazon doesn't know these things. I'm sure Amazon's strategy will work for them. They can either come into the tablet game with a fluke or a bang for every buck. They chose the ladder. Have we not learned from HP and the TouchPad? They came into the game with an overpriced tablet losing much more revenue with a flawed strategy. If the price isn't right for new products, people will question to take a chance. This strategy might lose them some money but its also going to practically guarantee millions of units sold. This will guarantee a substantial boost in app purchases, music purchases, books, movies, etc. throughout the amazon market, which will far surpass the $10 that Amazon will be losing for each unit. Think outside the box. This is nothing but clever.

posted on 02 Oct 2011, 06:41

14. shafboy (Posts: 179; Member since: 26 Sep 2010)


I agree, they aren't dumb obviously. They are already massive and I'm sure they know what to do.

posted on 02 Oct 2011, 09:01

15. remixfa (Posts: 13902; Member since: 19 Dec 2008)


exactly. They make the bar for entry really low, they make the device stand out and be really enticing, and they have an apple style lock on it where all purchases go through them. It will be on the front page of the amazon store until the next version comes out, and more than likely will be the highest selling android tablet by far because of that. Concidering its still a dual core tablet, im sure XDA will make good use of it and turn it into a cheap honeycomb/ICS tablet in no time, just like they did with the nook color.

Amazon knows what they are doing. This is probably the most thought out custom tablet launch yet.

posted on 01 Oct 2011, 15:52 1

2. agentoj (Posts: 100; Member since: 29 Oct 2009)


$200 for a decently fast tablet is great! Other sub $300 tablets do not have the support Amazon is willing to put into its tablet. I would say the Silk browser looks like ti will be ridiculously fast. Good stuff

posted on 01 Oct 2011, 15:59

3. dacastrator (Posts: 232; Member since: 22 Sep 2011)


It definitely is. But they will get shot. Bankrupt.

posted on 01 Oct 2011, 16:19

4. belovedson (Posts: 832; Member since: 30 Nov 2010)


it will be one of the hottest sells come christmas.

posted on 01 Oct 2011, 16:21 1

5. skymitch89 (Posts: 1042; Member since: 05 Nov 2010)


Thought they will be losing $10 per unit, think about how much they'll be making on the books, magazines, and other stuff they they'll be selling from it. Especially if they offer e-versions of college books.

posted on 01 Oct 2011, 16:36

6. Habib (Posts: 114; Member since: 26 Feb 2011)


LOL, sell 1 million kindle fire, and u lost 10 million :).
But, jus price it at 219.99 you gain that 10 million and i promise, I, as a middle low class spender, i would not care for the $20 bucks different. if i can get android apps from amazon app store

posted on 01 Oct 2011, 17:04 4

7. twenti7 (Posts: 152; Member since: 09 Jul 2011)


You personally might not mind paying an extra $20 for a decent product, but after working 4 years in retail environments (including Toys R Us and Radio Shack), I can assure you that is not the case with the majority of consumers. They see the $199 price tag, and even tho it's pretty much $200, simply by having a 1 at the beginning a product will sell significantly better. And while most consumers don't like spending very much initially, they are more likely to spend more money after purchase if they feel like they got a good deal on their initial purchase. Manufacturers know this, and it is a very smart move on Amazon's part. Yes, they will lose money initially, but they will quickly get it back and will likely end up making plenty of money in the end.

posted on 02 Oct 2011, 14:59

17. remixfa (Posts: 13902; Member since: 19 Dec 2008)


lose a nickel up front to make a dime in the end. exactly

posted on 01 Oct 2011, 17:46

10. InspectorGadget80 (Posts: 6244; Member since: 26 Mar 2011)


Amazon will eventually gain lots of profit after they launch their product even if it's only 10$. Their Kindle is the #1 book reader

posted on 01 Oct 2011, 18:30

11. bossmt_2 (Posts: 430; Member since: 13 Oct 2009)


This tablet will sell, the question is will they make money, if they sell a million tablets they need to make 10 million bucks in books, mp3, and apps. Basically they need every consumer to spend on average 25 bucks, which if all they do is convert kindle users to Kindle Fire users I'm sure they will be fine. I think the key with this is to stop the bleeding of people leaving the kindle for the Nook Color and regular tablets. it comes in at 50 bucks cheaper than the Nook color and it's better branded IMO.

posted on 01 Oct 2011, 18:50 2

12. RORYREVOLUTION (Posts: 2941; Member since: 12 Jan 2010)


This is going to out sell every android tablet there is and then some. Yes 7 inches might not be 9.7 or 10.1 that we all love and expect but this is great thinking on Amazon's part. They want to see how well and fast this little guy sells and if it is successful which I know it will be. Later on down the road they will then sell a larger, better spec'd, and more expensive version. But even that I expect to be no more than 300-350 which is still much cheaper than the 500-600+ the other tablets are.

posted on 02 Oct 2011, 01:09

13. jemolian (unregistered)


Amazon would probably be getting a cheaper price than listed since they require large quantities, so should it be more than $10 ?

posted on 02 Oct 2011, 10:04

16. dashak (unregistered)


This.

Amazon buying bulk parts would yield a discounted rate.
Plus, these figures are being extrapolated from a source that ISN'T Amazon itself. Who's to say they didn't work a deal with a given supplier.

I sincerely doubt they're taking a $10 loss on each tablet sold.

posted on 03 Oct 2011, 04:28

18. gamma (unregistered)


They dont expect instant profit from the unit sold! Its just to start hooking the user to the amazon service, where the real business will began...

Want to comment? Please login or register.

Latest stories