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IHS iSuppli: Amazon Kindle Fire Costs $201.70 to Manufacture

EL SEGUNDO, CA — Amazon’s Kindle Fire media tablet carries a BOM cost of $185.60, according to preliminary findings from the IHS iSuppli Teardown Analysis Service. When manufacturing services expenses are added, the cost increases to $201.70.

This is slightly lower than the IHS virtual estimate of the Kindle’s cost issued in September of a BOM amounting to $191.65, and a total of $209.63, when factoring in the manufacturing and the margin expenses.

Please note that this teardown assessment is preliminary in nature, and accounts only for hardware costs and does not include additional expenses such as software, licensing, royalties or other expenditures.

“The Kindle Fire, at a retail price point of $199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current $79 retail price point,” said Andrew Rassweiler, senior director, teardown services for IHS. “Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle. This is a similar business model to wireless companies such as AT&T or Verizon. They sell you a phone that costs them $400 to $600 or more to make for a price of only $200. However, they expect to more than make up for that loss with a two-year service contract.”

Surprise design wins in the Kindle fire include the use of a touch screen control-integrated source from the previously unknown source Ilitek and a wireless local area network (WLAN) module from new supplier Jorjin.

The use of an unfamiliar source for the touch screen controller integrated circuit (IC) reflects the growing trend of new suppliers entering the market. Amid booming sales for touch screen devices, IC suppliers have jumped into the fray to satisfy the increase in demand. This trend toward employing lesser-known sources is evident in recent designs including the Vizio tablet, which featured a touch control IC from EETI—and the Lenovo A60 smartphone, which employed a touch control IC from FocalTech Systems.

The use of the Jorjin WLAN module also represents a surprise, given that most tablet designs employ more complex combo solutions from Broadcom or Texas Instruments. The Jorjin device provides a cheaper approach to implementing WLAN support, at just $4.50, yielding a $1 savings in BOM costs.

Texas Instruments Inc. (TI) dominates the Kindle Fire design. Most notably, TI contributes the applications processor, which provides the core functionality of the tablet. The TI OMAP4430 processor costs $14.65, accounting for 7.9 percent of the Kindle Fire’s total BOM. However, TI also supplies other devices, including the power management device and the audio codec. This gives TI a total of $24 per each Kindle, or 12.9 percent of the BOM.

TI’s OMAP4430 applications processor has been identified in an increasing number of designs dissected by the IHS, including Research In Motion’s PlayBook RDJ21WW tablet, as well as the Motorola Droid Bionic XT875 and LG Optimus 3D P920 smartphones. The OMAP4430 is a dual-core ARM Cortex-A9, 1GHz processor with a IVA 3 Hardware Accelerator and a SGX540 3D graphics core. The device supports 1080P 2-D and 720P 3-D graphics, and is produced using 45nm process geometry.

The single most expensive subsystem in the Kindle Fire is the display and touch screen, at a combined cost of $87.00, or 46.9 percent of the BOM. Amazon sources the display from two companies: LG Display and E Ink Holdings. The display uses E Ink’s FFS technology, which LG Display has licensed.

Improved production yields and efficiencies have assisted greatly in reducing the cost of FFS tablet displays. In the same vein, touch screens have made big strides in cost reduction during the course of 2011.

The Kindle Fire incorporates 8 gigabytes of eMMC NAND flash memory. In the individual Kindle Fire torn down by IHS iSuppli, the NAND flash was supplied by Samsung. The eMMC NAND flash is fairly popular with most manufacturers, as it includes memory management circuitry.

IHS had assumed originally that the Kindle Fire might have as much as 8 gigabits of low-power DDR2 DRAM memory. In fact, the Kindle Fire ships with only 4 gigabits. This shaved off a few dollars from our previous cost estimates. Elpida was the supplier of the DRAM in the individual Kindle Fire torn down by IHS iSuppli.

Together, the NAND and DRAM form a memory subsystem costing $22.10, or 11.9 percent of the total BOM.

12 comments on “IHS iSuppli: Amazon Kindle Fire Costs $201.70 to Manufacture

  1. DataCrunch
    November 23, 2011

    Very nice breakdown on the BOM for the Kindle Fire.  Let’s see which consumer tablet device comes out the winner this holiday season.  The new Nook is coming out soon as well, but I believe the Kindle is lower priced.

  2. Kunmi
    November 24, 2011

    Do you really think it worth investing on this technology anymore when tablets have the same capability? I do not think the sales of these products are hot as it was when it first reached the market.

  3. DataCrunch
    November 24, 2011

    Hi Kumni, the new Amazon Kindle Fire and the new Barnes and Noble Nook tablets are indeed Android tablets.  They will both be running modified versions of the Android OS.

  4. Kunmi
    November 24, 2011

    Thank you for the enlightment. I think it makes sense if the manufacturing price is within the range of $201. I do appreciate your response.

  5. DataCrunch
    November 24, 2011

    You’re welcome Kunmi. But you were right in terms of the older models of the Kindle and Nook e-reader devices.  It was just a matter of time that the stand-alone e-reader devices would go away in exchange for more full featured tablet devices. 

  6. Clairvoyant
    November 24, 2011

    One benefit that the true e-book readers have is the easy-to-read “electronic paper” screen, that also has low power consumption. These are much easier to use for long periods of time without straining your eyes. The market will tell if there remains enough of a demand for e-book readers like this to stay around.

  7. t.alex
    November 26, 2011

    This strategy will surely kill all the small tablet makers where the income solely relies on device sales.

  8. hwong
    November 28, 2011

    Correct me if I am wrong, my impression is anti-trust law prohibits companies from selling products below manufacturing cost to maintain fair competition in the market. How can Amazon do that?

  9. Barbara Jorgensen
    November 29, 2011

    Hwong: I'm not sure if that is price-fixing rather than anti-trust. Competitors can lower their prices any time they want to compete. But it is an interesting question and I'll see if I can find some clarity.

  10. Wale Bakare
    December 3, 2011

    t.alex i agree with you. I wouldn't know if other smaller companies would able to compete at that level factoring in Amazon's reputation in the world market. Those ones manufacturing tablets in emerging and developing markets of  Asia and Africa, would bare the much of the price aheadache should Amazon Kindle Fire available there.  I think.

  11. Wale Bakare
    December 3, 2011

    @hwong, i think that might be the next level of war in technology – price. Patent infringement legal battles seem insufficient enough in competing for market shares.  HP previously had its tablet sold at very low price recently. Well, i think that shouldn't cause brouhaha amongst the regulators.

  12. bolaji ojo
    December 4, 2011

    Hwong, I don't see any conflicts with anti-trust laws here. Amazon is selling the Kindle as part of a package in which it expects to gain greater sales eventually with customers. In the US, telecom service providers subsidize phones to the tune of hundreds of dollars to get subscribers to sign contracts of up to two years. If they break the contract, they have to pay about $200 back to the service provider. This amount is lower than the regular price of a smartphone in many cases.

    Amazon's strategy is similar. It sells the Kindle below cost to get customers to buy other goods, apps and services on its sight. They are all doing this. Who's going to file anti-trust complaint?

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