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]