Amazon loses money on each Kindle Fire sold (on purpose)
Amazon is actually losing a couple bucks on every Kindle Fire tablet it sells. According to iSuppli, a market research firm, the cost of the components required to build a Kindle Fire tablet 鈥� from the battery to the memory to the plastic shell 鈥� totals approximately $185. Add in manufacturing and assembly fees, and that figure rises to $201.70. That's $2.70 more than the $199 price tag on the Fire.聽
By way of comparison, the 32 GB version of the iPad 2 costs about $326 to build. But Apple sells the device for $599, turning a nice $175 profit on each machine. (And Apple has聽sold an estimated 28 million iPad tablets since the device first hit shelves. In the last quarter alone, Apple unloaded 9.3 million iPads 2 tablets. You do the math.)
The iSuppli report, of course, is further evidence that Amazon views the Kindle Fire not as a money-making device in itself, but instead, as a portal into the vast Amazon ecosystem. Buy a Kindle Fire, the logic goes, and you'll probably buy at least a few Kindle e-books, and probably some Amazon video content, to boot. You may even sign up for Amazon Prime, a $79-a-year service, which includes a free book borrowing program.聽
As one critic wrote recently, in a generally positive review of the Fire, the device is聽"perhaps the best, tightest integration of digital content acquisition into a mobile device that we've yet seen.聽Instead of having a standalone shopping app the聽entire tablet聽is a store 鈥� a 7-inch window sold at a cut-rate price through which users can look onto a sea of premium content. It isn't a perfect experience, but if nothing else it's a promising look into the future of retail commerce."
Of course, Amazon has long pursued this type of retail commerce. Consider the original Kindle e-reader, or its more recent iterations, which have sold at bargain-basement rates 鈥� sometimes close to a hundred bucks. Apple, gunning for the luxury market, has produced a beautiful, successful and completely unnecessary tablet. Amazon, with the Kindle and Kindle Fire, has created something else entirely: a series of extremely-profitable sales portals.聽
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