Amazon To Lose $10 Per Kindle Fire

An anonymous reader writes "According to a manufacturing cost breakdown, it turns out Amazon is willing to sell its new Kindle Fire at a $10 loss. An analyst estimates that the Kindle Fire, priced at $199, actually costs $209.63 to produce. That said, the device is likely to be much more valuable to Amazon through content sales and the ability to drive more purchases through its website."

Comments

Well if an anlyst says so it must be true

[blahbooboo]

Gosh, these analysts get such huge salaries and most of the time they are wrong. What a great job!

Re:Well if an anlyst says so it must be true

[Xacid]

I find it hard to believe an estimation like this could even consider a $10 dollar difference not within margin of error. Pretty much non-news here.

Re:Well if an anlyst says so it must be true

[CastrTroy]

I agree. The only one who knows how much Amazon pays for each individual part is Amazon. These analysts have no idea what kind of deals Amazon has made with their suppliers. When you are dealing in the millions of units, there is quite a bit of negotiating room. Maybe the people who produce the parts are the ones taking a loss (initially) because they figure they can make more as production ramps up, and they would rather not lose the contract entirely. Analysts can make all the guesses they want as to the cost of these things. But something tells me they have no idea what they are talking about. How come the HP Tablet cost $300+ to make, but you can get a netbook with similar bill of materials for $179 retail?

Re:Well if an anlyst says so it must be true

[downhole]

I'd bet that even Amazon themselves couldn't produce a meaningful figure for what any particular one costs to make. They're probably buying enough parts from enough suppliers that all of their deals are changing all the time for each particular part. Not to mention the cost of the design process and creating and maintaining the custom software, production line shakeouts, estimated value of future purchases, estimated value of having control over some percent of the market, etc etc. Some department somewhere probably uses lots of Excel formulas and a little black magic to figure out that they'll do all right overall selling them for $199.

Re:Well if an anlyst says so it must be true

[icebike]

That's either a totally bogus number, or inside information direct from the manufacturer.

Nah, Neither is my guess.

Fire up your telephone team and start polling parts manufacturers, who are often only too happy to brag about bagging a big order for wifi chip sets, touch screens, memory, processors, etc. Most of these places will even leak pricing info. The content of a tablet is well established these days. Crank in some custom plastic work (with 40 tablets on the market this cost is fairly well known too).

Put it in a spread sheet, Crank in assembly, shipping, divide by number of units, an out pops the Bill of Materials cost.

That's why you get things estimated to the penny.

Maybe that qualifies as BOGUS in your world, but the story clearly states " analyst estimates". I'm not sure the word "bogus" can rationally be applied to an estimate.

But it really doesn't matter. Amazon will make up any loss in the first month of ownership due to sales of apps, music, emagazines, and ebooks.

Only $10?

[Sarten-X]

So a company with the bargaining power of Amazon makes a new product, and can't get the price down $10 more? I find that hard to believe. On top of that, the component prices in TFA are estimates. I see no indication of how accurate they are. I also don't see any point to this story.

Re:Only $10?

[melted]

ISuppli routinely lowballs estimates. Sure, the components cost this much. But how much does it cost to deliver them to the factory, put the devices together, test them, package them, write software for them, run the cloud services, etc, etc. It all costs money, and the fewer devices you sell, the greater fraction some of these costs are. So in a way, costs can't even be estimated until you know the overhead, and until you sell N units. And then Apple will sue their ass, further adding to the cost.

Re:no wonder they're buying palm

[fuzzyfuzzyfungus]

It will be interesting, once these units get into hacker hands, to see whether that strong incentive (which definitely exists, for the reasons you state), is pursued by technological means, or whether they'll skip the cat-and-mouse with the hypothetical 'fire dev team' and work on the assumption that the pool of users who want intuitive point-and-poke access to Amazon sold stuff is much larger than the pool of tablet hackers and ignore the problem...

Given that a fair number of nook colors have already been sold to the tablet tinkering crowd, and the HP touches during the blowout, and some of the Viewsonic and other cheap-but-not-bottom-of-barrel stuff, have all been out for a while, it won't necessarily be the case that the techie crowd will be all that dangerous in terms of numbers(especially if they do want to sideload some stuff; but also end up buying Amazon MP3s, kindle books, etc.)

It would certainly be no surprise to see some sort of lockdown; but it also might prove to not be worth the effort.

Not according to Amazon

[manekineko2]

http://www.pcmag.com/article2/0,2817,2393740,00.asp#fbid=ajRIdnxQUAV

"Amazon isn't doing anything special to prevent techies from "rooting" and rewriting the software on its powerful yet inexpensive new tablet, Jon Jenkins, director of Amazon's Silk browser project said."

the're not going to lose 1 cent

[cats-paw]

These kind of stories always show up - but no matter how much they think they know about the production they are STILL
underestimating the amount of buying power somebody like Amazon has.

Amazon is probably quoting an _initial_ production run of 10 million units. They are getting excellent pricing.
There is no way they are losing a penny on these things.

Re:no wonder they're buying palm

[Alex Belits]

Amazon is in a slightly better position than other companies that produce devices at loss.

A company that sells game console, cable box or phone to the consumer at loss intends to make profit on LICENSING access to things over it -- someone has to pay them to sell content to consumers (games) or consumers have to pay for access to something (TV, movies, wireless phone network). Now, rooted device allows to bypass those things -- everyone can write games, or switch to providers that have no relationship with manufacturers. The device is no longer a gatekeeper, so revenue is down.

But Amazon doesn't need gatekeepers -- they already sell everything over the Internet, with any computer and plenty of phones already perfectly capable of accessing most of their content. Even Kindle DRM for books can be stripped with a regular computer. Whatever losses Amazon can have due to "piracy", it already does have, so the only thing Amazon cares for is profit on sales. Rooted tablet does not compete with Amazon sales of anything -- it's still useful for buying things from Amazon and reading/watching them in a manner that is more convenient than other forms of purchase. It still makes downloads from Amazon more attractive than buying physical media, thus more purchases and less shipping costs.