Amazon is "clearly" subsidizing its Kindle Fire but the online retail giant isn't selling its new tablet at quite the loss as originally estimated, according to research firm IHS, formerly iSuppli.
In a late September bill of materials (BOM) estimate, IHS guessed that it would cost Amazon about $210 to make a Kindle Fire, meaning the company would lose between $10 or $11 on each tablet sold for the retail price of $199. But now that the research firm has got its hands on an actual Amazon tablet, it says the company's use of "some low-cost component selections" and "procurement advantages" mean the cost of making a Kindle Fire isn't quite as high as originally thought.
IHS won't divulge the new bill of materials estimate until finishing its teardown of the Kindle Fire, the research firm said Thursday. But Andrew Rassweiler, senior director of teardown services for HIS, did offer some clues as to where Amazon is saving money in the manufacture of its 7-inch, Android-powered tablet.
"Amazon's low BOM cost for the Kindle Fire is the result of many factors," Rassweiler said in a statement. "The primary factor is Amazon's product specification choices. However, Amazon also has capitalized on its rising purchasing stature. With media tablets from other companies failing to live up to expectations in recent months, Amazon's relative clout among component suppliers has risen.
"Suppliers are interested in finding the next 'rock star' tablet that will allow them to sell millions of components for a single device. As a result, these suppliers are willing to cut better deals for Amazon."
Some of the ways Amazon has reduced the cost of making the Kindle Fire have been known for some time. The new tablet doesn't have a camera, it has a plastic case, and its battery has significantly less capacity at 16 watt-hours than the battery in Apple's iPad, which boasts 26 watt-hours, according to IHS.
But the IHS team's preliminary teardown results did reveal something of a surprise, according to the research firm—a WLAN-only module made by Jorjin that stands in for the combo wireless modules integrating WLAN, Bluetooth, and FM radio functionality found in many tablets and smartphones.
"The Jorjin module is based on Texas Instruments' WL1270, a WLAN-only chip that the IHS iSuppli Teardown Analysis Service has seen only once before in the Color Nook," the report stated.