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Kindle Fire adds spice to tablet wars

Posted: 04 Oct 2011 ?? ?Print Version ?Bookmark and Share

Keywords:tablet? mobile market? iPad?

Last week, Amazon announced the Kindle Fire, a low-cost tablet computer version of the company's Kindle e-book. Kindle fire brings a welcome competition to the Apple-dominated tablet market. However, the tablet may also challenge opportunities for Taiwan system builders trying to make a mark in the new mobile market.

The most enticing feature of the Kindle Fire is its $199 price tag. The company is set to 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, which pegs the new tablet's bill of materials (BOM) at $150.

With those costs, Amazon will make an estimated $49 profit on sales of its tablet hardware. On the other hand, UBM TechInsights estimates Apple and RIM make $150 to $200 in gross profits on their tablets.

Kindle Fire

Amazon will make an estimated $49 profit on sales of its tablet hardware.

"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 priceand 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, which is 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.

Tablet comparison

The Kindle Fire cuts $10.50 from the Playbook costs by leaving out 5 and 3MPixel front- and rear-facing cameras. Amazon saves $8 by using 8GB 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.

Who gets burned by Kindle Fire?
Amazon is also stealing a page from cellular carriers, subsidizing the hardware costs in hopes of reaping a bonanza for its services businesses. It may be one of the few Web 2.0 companies that can pull off such a feat. It leads the online book business, has a recently enhanced movie and music business, a cloud services business that offers storage and computing and a fledgling app store.


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