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Is Amazon’s Kindle Fire Burning Apple?

In the closing days of 2011 it was reported that Amazon's shipments of Kindle Fire were stronger than expected. It was launched in mid-November. By the end of the year {complink 11480|Amazon.com Inc.} announced that about 4 million Kindles were shipped in December alone, of which more than half were the Fire.

Amazon has not yet released any official end-of-year results. The Kindle Fire is estimated to have shipped between 4 and 5 million units in its debut. According to Amazon “Kindle Fire is the #1 best-selling, most gifted, and most wished for product across the millions of items available on Amazon.com since its introduction 13 weeks ago.”

Did this hurt {complink 379|Apple Inc.} iPad2 sales in the fourth quarter of 2011? There are some reports that Kindle Fire took away 1 to 2 million units of potential sales from Apple. However, {complink 7526|Semico Research Corp.} views this as just speculation at this point. There have been no official statements from Apple on results of this most recent quarter. The company has not made any definitive statements on sales projections for Apple iPad2 for the quarter. In light of the fact that the tablet PC market is so new and in a state of flux and also the various supply chain disruptions due to earthquakes and floods, one could not expect otherwise.

Semico is currently estimating Apple iPad2 shipments will be about 15 million units in the fourth quarter of 2011. This would result in Apple shipping just over 40 million iPads in 2011. Semico projects that total tablet PC shipment will be 60 million units in 2011. Thus, Apple will hold about 67 percent market share in 2011. In 2010 Apple held 87 percent share, but there was hardly any competition at the time. If Kindle Fire actuals are in the mid-range of the estimate then Amazon will have carved out a 7.5 percent market share in less than 2 months.

At the beginning of 2011 Semico noted that there were about a hundred tablet PC models entering the market. We also expected to see a major shakeout during the year, with only a handful of competitors emerging from this huge pack. Kindle Fire was a late entry but made the biggest splash of all the tablet contenders.

Did Kindle Fire cannibalize iPad? Perhaps, but Semico does not believe it was to the extent that has been speculated by others. The lowest priced iPad2 is $499 while the kindle Fire is $200. Semico believes that many of the Kindle Fire customers may not have considered iPad2, due to the price. Reviews indicate that the iPad2 has more capabilities than the Fire — what do you expect given the price difference?

What will 2012 bring? Since the shakeout of 2011, there will be new products, but vendors will have to learn from those that fell by the wayside. Apple and Amazon both offer lots of apps and content. Price is a key factor; it has been rumored that Apple may come out with a smaller iPad and reach a lower price point. Google will be coming out with a tablet in 2012. Will it go after Amazon?

If vendors are looking to get into the corporate world, security issues need to be addressed. Semico expects to see continued strong sales of tablet PCs in general with a growth rate of over 40 percent.

16 comments on “Is Amazon’s Kindle Fire Burning Apple?

  1. olafbrows
    January 6, 2012

    Kindle will never ever burn Apple. There are too many loyal customers.

  2. bolaji ojo
    January 6, 2012

    Customers are not a company's personal property and their loyalty cannot and must not be taken for granted. They are free to switch at any time. Additionally, in order to continue to grow, a company must expand its customer base and not merely rely on the current group of “loyal” customers.

    Many say Apple is  a different sort of company. I disagree. Apple isn't any different. If a rival product comes along and either eats into your market or attracts new buyers for your type of product by offering better pricing, for instance, watch out. The customer-base erosion does not happen instantly. It occurs one Kindle/iPad at a time.

    By the way, I removed the link at the end of your posting because it leads directly to a site selling Kindle without offering EBN readers any additional information.

  3. Barbara Jorgensen
    January 6, 2012

    I'd agree with your conclusion that the Fire didn't take away as many sales from Apple as other analysts think. I think in the consumer market there is a difference between an investment–a chunk of money spent on something you expect to use for a long time–and a purchase. If I'm shelling out $500, it's an investment and I don't want to see upgrades coming out every 6 to 8 months. For $200, I'd be willing to try something out that retains its basic functionality for awhile, such as e-reader/digital media functions of the Kinfdle Fire, and see whta comes out a few years down the line.

  4. Anna Young
    January 6, 2012

    It will be fascinating to watch tablet price war this year. I wonder what impact if at all any will Google's tablet hold over amazon tablet, when Google releases its version – price and apps will be the key factors.

  5. itguyphil
    January 6, 2012

    I think if any tablet does NOT have that initial WOW factor, it will be a non-factor in the game.

  6. _hm
    January 6, 2012

    Amazon is making loss with Kindle fire. Also it is medicore product. Do Apple even notice Amazon Kindle Fire? Probably not as they are too busy carving future.

  7. Tony Massimini
    January 6, 2012

    Yes, Amazon is taking a loss on the Fire.  I also do not think that Amazon makes any pretense that it is trying to match Apple on a technial level,  That is like comparing a Toytota Corolla to a Mercedes Benz.

    The purpose of the Fire is as a vehicle to sell products online – ebooks, movies, or anything you can find on Amazon.com.  This is the old shaving blade and handle model – give away the handle and the customer will buys lots of blades over time.

  8. FLYINGSCOT
    January 7, 2012

    With Ipad and Fire at different ends of the segment it will be very interesting to see them meet in the middle with new product offerings.  I wonder who will win?

  9. t.alex
    January 7, 2012

    Anybody knows what products Apple will be releasing in 2012?

  10. _hm
    January 7, 2012

    May be Apple TV – super high resolution, brightness, contrast and with 3D. 

  11. Tony Massimini
    January 8, 2012

    In addition to HW the content is a key factor.  The latest news from various sources is that Apple is making a bid on the TV rights for the English Premier League (soccer).

     

    http://www.ibtimes.com/articles/277866/20120106/apple-launch-tv-bid-english-premier-league.htm

     

    This would provide a strong tie in for the iPad as well as Apple TV.

  12. Jay_Bond
    January 9, 2012

    I find it hard to believe that Amazon took that much market share from Apple. It is great to hear that the Fire has potentially taken an almost 8% market share in just two months, but this share was most likely taken from the lower market tablets. The people who are in the market for and Ipad (starting at 500), are going to look at comparable options like Samsung. If they are willing to spend at least $500, they are not going to view the Fire as an option. Apple is still running strong and their biggest competitor for marketshare would most likely be Samsung.

  13. Eldredge
    January 9, 2012

    @Barbara – I would also agree. One can't make the assumption that a comsumer who purchased a Kindle for $200 would have also paid $500 for an Apple product if the Kindle wasn't available. Many consumes would have decided not to purchase at all.

  14. Barbara Jorgensen
    January 9, 2012

    Another issue for would-be tablet buyers: the ultrabook. Depending on the price point, it could be an ultrabook vs. iPad debate. That $500 price is still too high for the “I'll buy this for fun” decision. Apple can command a premium as long as it continues to build the best products out there–but will the iPad be better than the ultrabook?

  15. JADEN
    January 17, 2012

    The Kindle Fire success in the last quarter of 2011 has been due mainly to its price, it cannot stand Apple Ipad.

  16. Anne
    January 17, 2012

    Kindle Fire is better for its price, storage and apps.  For Amazon to have just made a product better to compete with Apple is good thing.

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