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Amazon makes Rs.1,360 profit per Kindle Fire HD

Posted: 08 Nov 2012     Print Version  Bookmark and Share

Keywords:Kindle Fire HD  bill of materials  manufacturing cost  teardown 

The Rs.10,815.22 ($199) 16GB Kindle Fire HD carries a bill of materials (BOM) cost of Rs.8,967.39 ($165). This low-end version comes with a 7-inch display, 16GB of NAND flash memory, and Wi-Fi support. And, when the Rs.489.13 ($9) manufacturing cost is added, the total cost of production of this model increases to Rs.9,456.52 ($174).

"At Rs.9,456.52 ($174), the Kindle Fire HD costs slightly less to make than its sales price of Rs.10,815.22 ($199), strictly from a hardware and manufacturing perspective and not including other costs," according to a preliminary teardown assessment of Kindle Fire HD conducted by market analyst IHS.

IHS

"This is an improvement from original Kindle Fire, which was priced the same at Rs.10,815.22 ($199), but was initially estimated to carry Rs.10,961.96 ($201.70) in BOM and manufacturing costs based on estimates made in November, 2011, meaning that Amazon took a loss on every media tablet sale."

"Amazon's strategy with the Kindle Fire HD 7-inch tablet is not really to make money on the hardware itself," said Andrew Rassweiler, senior principal analyst, teardown services, for IHS. "Rather, the idea is to create a product at a compelling price point and then get a lot of consumer traction in order to put Amazon content and the Amazon online store into consumers' hands. However, for its second-generation Kindle Fire, Amazon has reduced the cost to make the tablet, cutting the cost of the hardware subsidy that the company must put out to pursue its strategy."

Amazon managed to reduce the BOM cost of the HD, despite improving the specifications compared to the original Kindle Fire. However, most of the improvements are incremental, allowing Amazon to reduce costs or minimise increases in individual sub-systems.

IHS

The company is offering other versions of the Kindle Fire HD beyond the base model dissected by the IHS iSuppli Teardown Analysis Service. The company also is selling two versions with 8.9-inch displays—one with Wi-Fi, and another with a 4G Long Term Evolution (LTE) wireless connection. Both the 7-inch and 8.9-inch models offer 16GB and 32GB memory options.


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