Smartphone: Next step for Amazon

Amazon.com Inc. is believed to roll its own smartphone in 4Q12, citing its supply-chain channel checks in Asia. This is according to Citigroup that also reckoned that the online retail firm is in talks with Foxconn International Holdings Ltd to develop the phone.

It expects Amazon to pay non-recurring engineering fees to Foxconn, but Taiwan's Hon Hai Precision Industry Co. Ltd will actually make the device and multiple components. The brokerage company also looks ahead to the smartphone adopting Texas Instruments' processor and Qualcomm's baseband chips.

"We expect Amazon's smartphone to be a mid-end device based on the processor it adopts," Citigroup said, and pegged the company's total cost for making such a phone at $150-$170 each.

The company's Kindle Fire tablet device uses components from Texas Instruments, Samsung Electronics, LG Electronics and Hynix Semiconductor. The device is expected to sell as many as five million in the fourth quarter and more next year.

"We continue to believe Amazon has now set its eyes on the Mobile (and tablet) Media and Product consumption frontier."