Amazon Takes Hit on Kindle Fire with Estimated Production Cost of $209.63


According to estimates made by IHS iSuppli, Amazon stands to lose about $10 on every Kindle Fire tablet sold. After calculating the cost of materials and manufacturing expenses, the firm concluded that each unit produced costs the retail giant $209.63. With Amazon set to sell the Kindle Fire for a mere $199.99, the company will take an initial financial hit in hopes that a low price generates a high volume of sales.

Amazon no doubt hopes to recuperate the initial cost through sales of digital media such as apps, music, and movies — services built into the core of the Kindle Fire’s overhauled Android OS. It may seem like a risky proposition, but it is more than reasonable to assume owners of the new tablet will spend at least $10 on average purchasing content from Amazon’s digital storefront. Furthermore, the increased interactions with Amazon and its brands should bolster the sale of physical goods. It’s an advantage most other Android manufacturers cannot take advantage of and one more reason why the Kindle Fire, even without all the bells and whistles of other slates, stands to make a huge impact on the tablet market.

[via Reuters]

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  1. Just like game consoles. Money is in the content.

    1. Pretty much. Amazon must have some high hopes for this device and that people will pay for their services more. I believe they can pull it off just fine though.

      1. You are all missing the big picture. First of all I’ll bet they are breaking even or close to it. Does not matter. In 6 months after selling a few million their unit cost will probably go down to $150. They will continue to sell it for $199 and nobody is going to complain. So it’s a good plan if you ask me.

        Also there is the obvious one as others have pointed out. The fact this is basically a portal to their services and if you use any of them they are making money on that.

        It’s not hard to understand and anyone focusing on the present day temporary costs just don’t get it.

        1. Also, no one can really replace Amazon’s kindle technology. It does look like an actual book page and not a computer screen. I may get this for my mom so she can do some reading, It’ll be a good gift for alot of people. It’ll sell.

  2. Yeah, ever since the press conference, I felt like this was Amazon’s trojan horse to get people to sign up for all their services.

    Hell, even I was ready to go Amazon Prime at the thought of buying this thing..

  3. the Amazon CEO went on record as saying that they are not taking a hit on the Kindle Fire’s. Such comments made publicly where shareholders can reference them are not oft to be “factually fuzzy”.

    Meaning – I’d take the word of the CEO that they’re not losing money on them.

    1. Yes, because CEO’s always tell the truth. *eyeroll*.

      1. When its a federal offense to give misleading or untruthful information to shareholders – then yes *eyeroll*.

        Go #occupywallst dweeb.

    2. This was an estimation that was given, right? 5% difference isn’t that much. So it is possible that they estimated incorrectly and amazon could be breaking even on them or even making some slim profits.

    3. There could easily be technicalities there. When you’re taking into account the physical costs of a device, different aspects of it can fall into different accounting methods. It’s possible to place some of the cost of the unit into the advertising budget, eliminating the hit and allowing them to claim they’re not taking a loss. I’m not saying that’s definitely what’s happening, but it’s feasible and consistent.

  4. Not sure I put too much faith in these kind of estimates at all and even less since nobody has even had a chance to open one of the devices up and see what is inside.

  5. If most buyers sign up for even just a single year of Amazon Prime, they’re golden.

  6. I suspect they break even. Might even be there model for the kindle of break even or close to break even. The way that drill manufacturers and retailers break even on their tools and make money on the bits.

  7. I never even considered buying a tablet until this… Now I’m pretty certain I will. Hell if I don’t use it, for $199 ill let my 10 year old daughter have it. It’s a price point thing. People will buy it because they’re already amazon cult followers or because its cheap enough to just give it a try.

  8. Don’t worry guys, as soon as that thing hits Amazon UK, it’ll be £300 ($450) and they’ll rake it in an every unit. As always, us plucky brits will subsidise the states.

    1. Does that include your VAT tax?

    2. Good on ya, mate.

    3. So true $199 is about £127 but when this hits the UK I’d be amazed if it was under £250

  9. This is no big deal at all. How often does Amazon provide $10 discounts? Every single day?

    But in this case this creates new sales directly.

    In the long run they are not losing $10 a sale. At worst they are breaking even. At best they are making a ton of money because of the Kindle Fire.

  10. Sony lost money on ps3 too and hoped to make money through game sales.

    1. Every single console except those made by Nintendo follows this model at launch. It wasn’t unique to the PS3.

  11. Assuming that this baseless estimate is real, $10 is chump change to lose on a device. The hits that Sony and Microsoft take on their consoles are much higher from what I’ve heard.

  12. All someone has to do is buy the kindle fire, an app, a book, and subscribe to the premium service and Amazon more than makes up the loss.

  13. They going to make their money on cases =op

  14. I honestly am excited about the Fire, but I just realized the only thing I really wanted in a tablet was a front facing camera. I have an iPad, and I’m honestly underwhelmed with it. The price point is what I love though, it beats the iPad in price and in specs, just wish it had a front facing camera… :/

  15. So they would have to sell almost one to every citizen of the united stated before -9$ a tablet even showed up in the books… And that’s only if none of the owners purchesed any apps/books/subscriptions. They will definitely make money of this thing. Guarenteed.

  16. the calcultion is very suspect. a company as large as Amazon could negotiate massive discounts on the cost of materials. they would knock the price down to rock bottom. if isuppli overestimated by 5% then that means Amazon are breaking even..

    but it is true that most hardware manufacturers dont care about the profit they make on the device, its the services now that generate the profit. microsoft, sony, nintendo and now amazon… would gladly give away the hardware for free if they could and make sure everyone had one. the more devices out there means more chance someone will buy a game or ebook or whatever.

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