SAN JOSE, Calif. – Amazon will make a profit on hardware sales of its Kindle Fire, but probably only a third to a quarter as much as the Apple iPad and Playbook, according to estimates from UBM TechInsights that peg new tablet's bill of materials at $150.
With those costs, Amazon will make an estimated $49 profit on sales of its tablet hardware. By contrast, UBM TechInsights estimates Apple and RIM make $150 to $200 in gross profits on their tablets.
"This can be viewed as a major blow to all
Android tablet manufacturers who really have no way to compete since the
channel mark-up would require companies put their tablets at or below
cost to beat the Kindle Fire price--and they still all lack the content
that the Amazon storefront has," said Jeffrey Brown, vice president of
business intelligence at UBM TechInsights, a division of UBM LLC, the
publisher of EE Times.
Before the launch of the Kindle Fire,
reports circulated that Amazon was rushing the product to market and, as
such, taking its design cues mainly from the 7-inch Playbook, already
the subject of teardown reports. UBM TechInsights estimated the bill of materials for the Playbook at $170.
"The Amazon Kindle Fire looks similar in fit and form to the Blackberry Playbook, but it’s been stripped of its bells and whistles to help bring down the price," said Brown.
"We expect that the Kindle Fire's dual-core processor will be the TI OMAP 4430, just like the Playbook, it will use similar flash memory from SanDisk and Toshiba and we don’t expect the similarities to stop there," he said.
The Kindle Fire cuts $10.50 from the Playbook costs by leaving out 5 and 3 MPixel front- and rear-facing cameras. Amazon saves $8 by using 8 Gbytes less memory than RIM, and another $1.50 by cutting out Bluetooth, GPS and microphone support, UBM TechInsights said.
"The real benefit for Amazon in entering the tablet space is the advantage of a direct, established, sales model on Amazon.com versus the rest of its Android competitors," said Brown. "They also have name recognition and a wealth of content behind the device which puts them on a level with Apple," Brown said.
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