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On this blog we will track down the latest Amazon Kindle news. We will keep you up to date with whats hot in the bestsellers section, including books, ebooks and blogs... and we will also bring you great Kindle3 tips and tricks along with reviews for the latest KindleDX accessories.

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September 2016
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Kindle Fire HD Teardown Shows Small Profits Compared to Competition

When the original Kindle Fire was introduced, it was a huge shock to see such a powerful device offered for so little money.  It was literally the device that changed the Android tablet market.  A year later it’s no shock to see brand new 7” devices going for around $199.  Are we still getting the same sort of value for that hardware price, though?  An IHS iSuppli teardown team has looked into the components in details to give us an idea about exactly that.

What they have managed to determine is that while Amazon may not be subsidizing the Kindle Fire HD as they are suspected to have done with the first run of the Kindle Fire, it is still not a big money maker at the time of initial sales.  This fits with a previous assertion by Jeff Bezos that the tablet is sold at cost.

Exploded Kindle Fire HD – Image Credit to AllThingsD

Because they were planning to make any real profits off of digital content sales down the line, the Kindle Fire didn’t need to make money right away.  The first teardowns estimated that it cost anywhere from $187-202 in materials alone per device.  Factoring in the development costs and other miscellaneous expenses means that there was little chance of breaking even on a $199 sale.

This newest teardown indicates that the Kindle Fire HD is composed of about $165 worth of material.  The major components come from LG Display, Texas Instruments, and Samsung.  Basically we’re looking at a more advanced device built by a more established name in tablets for less money.

That might explain why the ability to remove the Special Offers on these devices was added so quickly after protests and made so cheap.  If it’s not losing money then there is no good reason to force the ad subsidy.

While it does appear that Amazon might be making at least small profits on the Kindle Fire HD now, they’re not exactly trying to turn it into a major revenue stream.  Consider the competition.  Similar teardowns of the Google Nexus 7 and iPad Mini show material costs of $152 and $188 respectively.  If we’re ignoring after-purchase digital sales entirely, Amazon and Google are making less than $50 per tablet they sell compared to Apple’s $140 with Amazon bringing in the least of the three.

All told, it’s safe to claim that Amazon is still offering great value for the money on the Kindle Fire HD.  You can’t necessarily equate the cost of components to the quality of the hardware, but it’s not a completely worthless indication either.  Amazon’s ability to sell their hardware at cost will continue to make it more difficult for newcomers without their own ecosystems to break into the affordable tablet market, but for the moment it is good for the customer.  The industry is hardly likely to stagnate with Apple, Amazon, and Google all fighting to get the lion’s share of small tablet sales.

Kindle 4 Cost Breakdown

Recently Andrei managed to thoroughly break a perfectly good new Kindle 4 in his quest for ever more complete understanding of what’s going on inside our favorite devices.  The information and photos accompanying these posts got me thinking about Amazon’s new pricing gambit.  There’s a lot of focus right now on how cheap the Kindle Fire is being sold at, especially in light of the fact that recent reports have Amazon selling it at a loss, but nobody is really talking much about the fact that there is now a fully functional eReader connected to a major platform available for only $80.

Are they still making any money at all, or is this Kindle even more heavily subsidized than the Fire?  Let’s look into it a bit.  I’m not claiming any inside information beyond a working knowledge of searching the Internet, but what I found was fairly interesting.  The component list is based on the disassembly I mentioned:

  • 6″ E INK Display – ED060CF(LF)T1 REN60B7075(C62)
  • ARM Cortex-A8 CPU – MCIMX508CVK8B N78A 8TFC1130E
  • WLAN 802.11 b/g/n – Atheros AR6103T-BM2D 26AR0620.142D PAF284.1B 1126
  • Flash – SanDisk SDIN502-2G
  • Memory – Hynix H5MS2G22AFR E3M 129A
  • E INK Controller(?) – Winbond W25Q40BV
  • Power Management Chip – Texas Instruments SN92009 A4 TI 18IG2 AOR5 G4
  • Battery Controller – Freescale MC13892AJ CQQD129D
  • 30 Day Lithium Polymer Battery – 3.7V, 890mAh, MC-265360
  • Aluminum Case

Some of this was hard to find.  Other bits, like the Atheros AR6103T, don’t really seem to exist as far as the internet is concerned.  Where necessary I’m using best guesses, product families, and superficially equivalent parts for comparison.  After a bit of inquiry, here are the numbers I’m coming up with:

  • Display: $48 (Based on similar 6″ E INK Displays, no bulk pricing calculations)
  • CPU: $13
  • WLAN: $6 (Based on Kindle Fire breakdown by iSuppli. May be cheaper here since performance matters less)
  • Flash: $2.50 (Assuming similarity with previous models)
  • Memory: $1 (Researched as low as $0.01 in bulk orders.  Rounding up)
  • E INK Controller: $9
  • Power Management: $4 (Assuming similarity with previous models)
  • Battery Controller $3.50 (Rounding up from $3.32/1000 units.  Probably cheaper in batches of millions)
  • Battery: $3
  • Case: $5 (Assuming slightly more expensive than older Kindle models based on materials used)
  • Manufacturing Costs: $8 (Based on iSuppli Kindle Fire breakdown)
  • Other Materials: $10 (I’m sure I missed something)
    • Total Costs: $113

Given that I have done my best to be extremely conservative in these estimations, this should probably be considered an upper limit of the actual device costs.  Amazon will probably be quite a bit better at finding component discounts at this point than I am after my 48 hours or so of experience.  Even so, given that the basic model with no Special Offers integration is going for $109, I think I got pretty close.

One of the biggest things that I think we have to keep in mind with this new Kindle is that there is every indication this device is not meant to be serviced under any circumstances.  According to multiple reports so far, it is almost impossible to open the case without damage even if you know exactly what you are doing.  Even if that is accomplished, there was more glue used in this Kindle than makes sense.  It is clearly not meant to be serviced, either by customers or by Amazon themselves.  That means it has to be cheap enough for outright replacement of the hardware in the case of necessary servicing, with salvaging of little more than the E INK screens likely.

With this information, I think it is safe to say that Amazon won’t be throwing any money down a hole by subsidizing the Kindle 4.  They have gone above and beyond to build a new generation of the line that is far more cost effective than before while still offering maximum reading functionality.  Some money was definitely able to be saved by the exclusion of audio and touchscreen capabilities as well, of course.

The largest expense remains the E INK screen, but since this is the essential component of what makes a dedicated eReader worth having, it is hard to underestimate the importance.  You really can’t do without it and as yet I haven’t heard of any worthwhile substitutes.  For the moment this may mean that any further price drops will rely on the success of Kindle-based advertising.  With the baseline model already available for under $100, though, there’s not really much room left to complain about price.

Verdict: Amazon doesn’t loose money on Kindle 4 non-touch. Even with retail component prices, manufacture costs come very close to what device sells for. Kindle with special offers has been around for a while so it is safe to assume that Amazon know how much money they are going to make from advertising in the long run and it is reflected in $30 discount and the fact that you can remove special offers from your device for the same price of $30. It also seems that there is still room left for price reductions in the future.