iSuppli, who are usually more accurate, did a teardown of an actual Fire and placed BOM at ~$183, with a total cost to manufacture at ~$203, or about $4 OVER retail. Amazon's strategy is to be the Gillette of content and give away tablets to sell content. That's much is obvious, because you can't increase profits by selling more products you're losing money on.
The only value this first Amazon Kindle tablet has for me is to bring up whether more resources should be put in the hands of the consumer or in the cloud. A cheaper consumer device means a more expensive cloud. And since cloud resources need the most advanced cooling, it can never be cost effective.
To be honest, though I have stuff stored on the cloud, I hardly look at them, because of the additional login. Even Facebook photos will pass into oblivion. So I don't think purchasing cloud storage will work, unless maybe it is insured to be highly maintained (better than myself) and guaranteed backup.
But why I won't buy any Amazon screen is I thought general advice was not to stare at a screen for more than a half-hour at a time. That's why paper books will always be healthier.
I think it is a good device at that price point. No use comparing it with the iPad since it doesn't tout to be one but heck, it can do 90% of what the iPad can do for a lot lot less and of course with the distinct advantage of access to the huge Amazon store of music and books.
In fact looking at it, it is quite a good strategy. Some people do not need so much space so users can have a choice of purchasing more storage from the cloud.
Amazon can do a lowcost phone for the next move.
I wished to see more detailed descriptions of the tear down rather than these dumb pictures. I feel amazons strategy is right to sell the hardware at the less price to increase the sales of services in future.