If the BOM cost is ~$143, incluing the overheads, the manufacturing cost of this product could be any where between $160 to $180. Looks like Amazon is selling it at a very low profit margin, betting on the volume?
I don't think Amazon's play here has anything to do with making money on the Kindle Fire tablet. It appears that the company has set things up so that it will break even on the sales, maybe make a couple of bucks. But the real motivation here is that Amazon saw what was happening with Apple and feared that as more people got their hands on iPads they would buy more books, music, apps, etc. from Apple. Amazon needed to get into customers' and potential customers' hands a device that would increase the chances that they would buy media directly from Amazon. You can say what you want about the design--I'm sure it's not as elegant as the iPad--but it's a brilliant move because the cost--less than half of an entry level iPad--will entice many a buyer and Amazon will at the very least put a speed bump in iPad's momentum.
But there is a Kindle apps for iPAD, I think people can still buy books from Amazon. I personally don't think this is a very nice idea to invest on developing another hardware that more or less is just a colorful ebook reader.
I'm not sure why you say that. It's a low-cost Android tablet. Yes, customized to make it easy for users to buy ebooks from Amazon, but still a tablet -- not just an eReader.
Personally, for reading books, I prefer the e-ink display of the regular Kindle. But I use a tablet for web browsing, email and general media consumption. For consumers who want just one device for all of that, they will want a tablet rather than a dedicated eReader. And for $199, the Fire is within reach of many more consumers than other tablets, especially the iPad.
I played with mine last night. It's a very capable tablet for the price. The Amazon UI is fairly intuitive. I had my parents up and running using it in minutes. It nicely played music I was streaming from my collection on the Amazon Cloud. While I was web browsing, scanning Facebook, playing Words with Friends, etc. I also streamed a movie from Amazon's library with little lag or any artifacts. Flash websites were also working nicely. Which was a pleasant surprise for an iPhone user like myself. And, the nice touch, it was already configured for me. I was connected to my Amazon account right out of the box. With links to all my digital property (music, Kindle books, etc.). For this price, it's tough to beat...