I agree with you barbara. OEMs do all they can to gain market shares. Reducing manufacturing cost, outsourcing, ensuring they get best deals from component vendors and making sure they set lower and affordable prices for customers.
Ms. Daisy, Amazon could give away a Kindle per customer and it still won't regret the decision. The Kindle is a profit driver and not the profit maker itself. By that I mean the Kindle is the Coach that gets the gambler to casino land. Room and board may be free but you'll exit with an empty pocket.
Amazon is selling the Kindle below cost to sell other products and the device is a money generator for the company. It lets consumers buy Amazon products anywhere and anytime. I had written in the past that the tablet should be given away, much like many wireless service providers give away free phones. Today, it's free but over the life of the obligatory two-year contract, the customer will pay for more than the "free" phone.
Who exactly is being forced to swallow an even bigger portion of the pricing concessions in the supply chain?
@Bolaji, thanks for the article. Do you think this pricing concession is affecting the money that is entering the R&D as well, because if the investors don't get proper ROI on their investment because of this price concession they will be hesitant to invest further in future.
Barbara, Amazon is selling the Kindle Fire at a loss, true, but the company doesn't believe it's a losing strategy. With each sale of the Kindle, Amazon really gets implanted in the consumer's mind. I tried out a Kindle in a store and knew I didn't want it. The device is a portal for Amazon, opening the door to the products the company sells. If you already buy from Amazon the Kindle will get you properly hooked. If you don't already but get a Kindle, you'll get hooked somehow.
The company will lose on each Kindle sale but overall will win on the sale of its other products. And now, with the Kindle, you don't have to fire up a web browser or reboot your computer to get on Amazon. Just turn on the Kindle. Brilliant!
There are actually 2 different BOM estimates that conflict enough to prove/refute the Kindle +/- margin. And the bottom line is: razor thin, either way.
I think the Holiday Season '11 launch show both Kindle Fire and iPad with brisk sales.
So it aglains with the crystal ball nature of this piece that the Race To The Bottom is afoot.
Great blog, and I think the answer is "all of the above." I have to think, though, that reducing overhead has to play a big role in the price wars. How can Amazon continue to sell its products at a loss? If teardown analyses are correct, the original Kindle and the Fire cost more to manufacture than what they are selling for. That implies that it is Amazon that's taking the hit, not the EMS or componetn makers.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This
