Research firm: Amazon sells $199 tablet at a loss

November 18, 2011 By PETER SVENSSON , AP Technology Writer
This file photograph taken Sept. 28, 2011, shows the Kindle Fire at a news conference, in New York. Research firm IHS said the Amazon.com Inc.'s Kindle Fire tablet, which started shipping this week, costs $201.70 to make, $2.70 more than Amazon charges for it. (AP Photo/Mark Lennihan, File)

(AP) -- Amazon.com Inc.'s Kindle Fire tablet, which started shipping this week, costs $201.70 to make, a research firm said Friday. That's $2.70 more than Amazon charges for it.

The analysis by IHS indicates that Amazon is, at least initially, selling the tablet at a loss that it hopes to cover through sales of books and movies for the device. The manufacturing cost of a new gadget usually comes down over time as chips become cheaper.

Amazon CEO Jeff Bezos told The Associated Press in September that the company's goal was to make a small profit from the hardware, but as a retail company, Amazon was willing to live with a smaller margin than most electronics companies would.

"We want the hardware device to be profitable and the content to be profitable. We really don't want to subsidize one with the other," Bezos said.

IHS's estimate includes the cost of components and assembly, but not the costs of development, marketing or packaging. The most expensive part of the Kindle Fire is the 7-inch color touch screen, which costs $87.

Amazon kept the cost of the tablet low compared to Apple Inc.'s iPad and similar tablets by making it smaller - the screen is half the size of that for the iPad - keeping the amount of memory low and excluding a camera and microphone.

But the difference in manufacturing cost is much smaller than the difference in retail price: IHS puts the cost of the basic iPad 2 model at just under $300, while Apple sells it for $499.

Explore further: Amazon says Kindle sales leapfrog hardback sales

0 shares

Related Stories

Amazon planning iPad rival by October: WSJ

July 13, 2011

Online retail giant Amazon plans to unveil a tablet computer before October in a bid to carve out a slice of a growing market dominated by Apple's iPad, The Wall Street Journal reported Wednesday.

Analysis says $79 Kindle costs $84 to make

November 11, 2011

A recent analysis from IHS iSuppli determined that Amazon's $79 Kindle e-reader, which is the online retailer's cheapest Kindle thus far, costs $84.25 to make.

Recommended for you

Magnetic fields provide a new way to communicate wirelessly

September 1, 2015

Electrical engineers at the University of California, San Diego demonstrated a new wireless communication technique that works by sending magnetic signals through the human body. The new technology could offer a lower power ...

2 comments

Adjust slider to filter visible comments by rank

Display comments: newest first

dschlink
5 / 5 (1) Nov 18, 2011
"Give the printer away and sell ink at $150,000 a kilo."

Don't know the source.
larkforsure
1 / 5 (2) Nov 18, 2011
[ Begging for Life] Complaint about IBM China CSR on Centennial

Please Google:

IBM detained mother of ex-employee on the day of centennial
or
How Much IBM Can Get Away with is the Responsibility of the Media
or
Tragedy of Labor Rights Repression in IBM China
or
IBM Advised to Treat its People with Humanism in China

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.