Study: Amazon Losing $3 On Each Kindle Fire It Sells

Speculation that Amazon is losing money on its $199 Kindle Fire has been rampant since pricing for the ebook reader was announced. Now, research firm iSuppli has broken the Fire down to its core components, and has determined that the Fire is costing the company at least $201.70 to manufacture, meaning Amazon is losing roughly $2.70 on each one it sells.

The LA Times breaks down the teardown:

The Fire’s 7-inch screen is the priciest part of the device, coming in at a cost of about $87 per unit, IHS said. Supplying the displays for the Fire are LG (which also makes the Barnes & Noble Nook Color and Nook Tablet’s 7-inch screens) and E Ink (which produces the Kindle eReader displays), the research firm said. …

Amazon also saved money by not including items such as a camera, microphone, microSD card slot, HDMI port, 3G or 4G wireless radios and other features found in many rival tablets.

The estimate doesn’t include software or marketing costs, which could push Amazon’s total cost for each device higher.

Amazon is apparently willing to take a loss on the Fire, industry watchers assume, based on its expectations that customers will make up the difference by buying lots of books, movies and music using the device. Yesterday, a report from Citigroup speculated that Amazon might apply the same model to the smartphone market, and roll out a money-losing phone next year.

Amazon’s $199 Kindle Fire costs $201.70 to build, report says [LA Times]