

Amazon tablet costs $209.63 to make, IHS estimates - hariis
http://finance.yahoo.com/news/Amazon-tablet-costs-20963-to-rb-2965697034.html?x=0&sec=topStories&pos=6&asset=&ccode=

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AlexMuir
Sold at a $10 loss, which Amazon will recoup off about three eBooks over the
lifetime of a device. My immediate thought was 'Why isn't everyone (being
doing this?', and then I read of fears of a pricing war at the lower end of
the tablet market. But that's not going to happen, and here's why.

Samsung and HP aren't retailers. People don't (almost without exception) buy
direct from them. You don't visit Samsung.com and order a Tab. You buy them at
other retailers like BestBuy and (lol) Amazon. So Samsung have to add another
hefty cost on top of their manufacturing cost - the retailer's margin. Bestbuy
don't want to be stocking shelves full of Galaxy Tabs, littered with
merchandising, for the lure of 3%. They probably didn't much fancy the HP
Touchpad either, and look how that turned out. (They'll stock Apple goodies
for wafer-thin margins though, because it brings in affluent customers and
looks good in the store.)

Amazon are going to be playing on their own at the $200 price-point - not only
are they the only player who can subsidise devices with future content sales,
but they can distribute them for virtually nothing. $1 to UPS and your Kindle
is on its way.

But there's a big multicoloured elephant in the room waving it's trunk around.
Yes, it's Google. And they've got neither manufacturing, nor retailing, nor
future content sales. But they're big and rich and a bit mental.

\--

Also posted at [http://www.alexmuir.com/2011/09/why-apple-and-amazon-are-
con...](http://www.alexmuir.com/2011/09/why-apple-and-amazon-are-contenders-
but-samsung-and-hp-arent/)

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DrStalker
Vendors like Samsung and HP also have much lower expectations of additional
future purchases from them once a user buys the device.

If you buy an eBook reader you need to obtain a steady stream on content for
it as long as you want to keep using it, while other retailers have a far
higher chance of not getting that $10 back because they don't have a well
establish content store like Amazon or iTunes.

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wazoox
iSuppli routinely made the same claim about iPhone 3, 3GS and 4, as well as
the iPad 1 and 2. They take the standard, off-the-shelf component prices, make
an addition and publish a press release "Ta-da! They must be losing money,
those sneaky bastards!". This is getting tiring.

Amazon, just like Apple, doesn't really buy components by the million at
street unit price, is this a surprise? Why do people still comment on these
non-events, insignificant press releases? This is only iSuppli marketing, and
not much else.

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kalleboo
> They take the standard, off-the-shelf component prices

Do you have a source for this or are you just making an assumption?

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wazoox
At least that was exactly the case the first few times they made their PR on
iPhones; they gave the price per component, and it could easily be verified on
the web to be usual, off-the-shelf street prices.

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DenisM
The bigger picture is that Amazon is my library - they keep all my books. Now
they want to keep all my movies, music and apps. If they succeed, they will
keep me as a customer for life, and that's way more than $10.

Similarly, Apple wants to be my library too - they keep some of my music, most
of my apps, and now they also want to keep my videos, my app data (including
but not limited to books) and the rest of my music via iCloud.

IOW, they key battle here is for being X in "I keep all my
books/music/movies/games over at X" for the average Joe.

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JamieEi
The difference is that your Amazon content can be used on virtually any
device, whereas Apple has little interest in bringing iX to any additional
non-Apple devices.

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mdasen
The big question will is: how long will the Kindle Fire last? That is to say,
will this initial model still be the model sold in 6, 12, 24 months time? If
Amazon can make people think of the Kindle Fire not as a piece of technology
that is quickly out of date, but a bit of a premium device (albeit at a cut-
rate price) that isn't going to feel old in a year, the economics will get
much better over the product's life-cycle. Given that the specs on the device
are pretty good (dual-core processor, display with IPS) yet nebulous (I
haven't seen a stated resolution, processor clock speed, or RAM amount), it's
possible that Amazon wants people to think of this as a product that won't
change as quickly as, say, Android devices change. Amazon also has the option
to exert a decent amount of control over the platform since they're doing both
the hardware and the software and I think the Silk browser is part of that
desire to move things that would be spec dependent off the device itself to
ensure greater hardware longevity.

If Amazon is still selling this model 1-2 years from now, they'll be in a
decent position. If people obsess over specs rather than wanting to buy into
an "Amazon experience" or similar, less-spec-driven purchase process, then
Amazon might not be in as good a place given the low to negative margins at
release.

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av500
CPU is an OMAP4, dual core A9 at 2x1GHz. The CPU is pretty good and can e.g.
encode/decode full HD easily. RAM should be 1GB which the new iPhone is
rumoured to come out with, so it should be good for 2-3 years...

In total the HW platform is pretty solid, it's not a relabeled cheap Chinese
tablet...

~~~
majorlazer
RAM is actually 512MB. Which is rather low by today's standards. But as long
as they strip the Android OS to run only what is needed, not like the bloated
crap that's coming from the major carriers, it should be enough for most
cases.

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jonknee
That's what the iPad 2 has and it doesn't seem tight on memory.

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nextparadigms
Counting the value they get on average from each customer, they should make
$10 in profit on each device according to iSuppli, but they'll probably make a
little more than that.

 _"When further costs outside of materials and manufacturing are added in --
and the $199 price of the tablet is factored along with the expected sales of
digital content per device -- Amazon is likely to generate a marginal profit
of $10 on each Kindle Fire sold," the research firm added._

~~~
hugacow
I bought a $29.99 Kindle Fire Zip Sleeve, which is easily at least $10 in
profit to Amazon. Unlike iPad owners, Kindle customers buy covers, so I'm
probably not in the minority, even if it is a relatively cheap device.

When ours comes in, I also plan to buy apps, etc. Easily an additional $10
will be spent within days of acquisition. My guess is that they will have at
least another $30 in profit the first year from books, etc. and may sign up
for Amazon Prime to get unlimited streaming, which is something I hadn't
considered seriously until I saw it on the Fire page.

No wonder Amazon stock went up about 20% over the past several months. Some
people knew this was going to be a big win.

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WalterBright
> I bought a $29.99 Kindle Fire Zip Sleeve

I use a used bubble wrap mailing envelope. It fits the Kindle perfectly,
protects the Kindle very well, costs $0.00, and it doesn't scream "steal me".

~~~
monjaro
That's funny, I did the exact same thing with my kindle dx until all the
bubblewrap deflated. It fit perfectly.

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fragsworth
It's somewhat fascinating to see how Apple, Amazon, Google, etc. are taking
over traditional publishing businesses with their platforms.

Why were traditional publishers blind to the fact that technology would
replace them if they did not act? Or, if they were not blind of this fact,
what prevented them from producing or investing in the new technologies
themselves? What is it that makes old companies so slow to react to shifts in
technology?

There is some kind of inherent advantage that tech companies seem to possess:
regardless of their original market, they tend to be capable of adapting to
significant market changes, sometimes with the effect of consuming old
markets.

~~~
Hyena
Google, et al are taking over the traditional _printing and retailing_
business. This was only the province of publishers when it made financial
sense to provide these services in house. Publishers also market, set, edit,
translate, and finance books. In the ebook market, this can mean both
simplified distribution and production; it is not a problem for publishers.

