How much did it cost Amazon to build Kindle Fire?

How much did it cost Amazon to build Kindle Fire?

Amazon to lose money on each tablet sale, analysts say – CNN.com.

amazon prime menuIt’s no accident digital content is listed at the top of Amazon’s Prime menu.

What was probably the most shocking part about the Kindle Fire announcement was the price. Consumers has come to the expectation that tablets will go upwards of $300+. If you want quality tablets, Apple’s iPads and Samsung’s Galaxy Tab comes to mind. Both tablets go for almost $500 a piece. A good article today by CNN.com got some estimates how much it cost Amazon to build the Kindle Fire from technology reesearch firm IHS iSuppli and UBM TechInsights. IHS iSuppli estimates that parts and manufacturing costs Amazon about $209.62 to build and this excludes any researching, investing and marketing costs. UBM TechInsights puts the Fire at $150 which excludes assembly.

So why would Amazon price a tablet to lose money? Several reasons. One is to attract buyers. Had Amazon price this in the $300 range, there is no reason people who held back on buying a tablet to get the Fire. Pricing this below $200 before tax is not only attractive to people who don’t have a tablet, but it encourages people to buy a 2nd tablet. This may also steal some would-be-ipad customers. People holding out on the next generation iPad may be attracted to Fire’s price and give up the wait. There are currently no plan for Apple to release the next gen iPad anytime soon. The 2nd reason is that the low price encourages people to spend more on content. Amazon’s business plan is clearly to recoup the cost through its value added services, selling digital content such as movies, TV show, songs, and e-books, and it’s subscription service Amazon Prime.

In my previous post, another feature of its tablet is the Amazon Silk browser. It features cloud accelerated browsing which predicts your web browsing habits and preloads sites before you click! As cool as it sounds, I don’t see how this is possible unless they somehow store your browsing habits and history. People may argue it is no different when supermarkets encourage you to use their club card to get discount to monitor your shopping habits. Amazon already has your purchase history through its e-store but your navigation through Silk may be worth more than the cost they are losing per Fire sold.

Would this encourage you to buy the Kindle Fire? It would be interesting to see how many people purchase the Kindle Fire and not buy one digital content or subscription.

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