Amazon is burning up the tablet market with buzz about its new Kindle Fire. Now, some analysts are speculating that the e-commerce giant might introduce a smartphone next year.
Pointing to its supply-chain channel analysis in Asia, Citigroup suggested Amazon may be planning to roll out a smartphone in the fourth quarter of 2012. Reuters got its hands on a research note dated Nov. 17 in which the brokerage tied Amazon to Foxconn International Holdings, a contract manufacturer that works with Apple.
"With the clear success of the Kindle ereader over the past three years, and Kindle Fire possibly succeeding in the low-priced tablet market, we view this as the next logical step for Amazon," the brokerage said.
Kindle Smartphone Details
The Citibank note offered many details, none of which are confirmed, including the chipmaker and processor. Citibank expects Amazon to tap a Texas Instruments processor and Qualcomm's baseband chips, Reuters reported, and use Taiwan's Hon Hai Precision Industry to make the device. Amazon was not immediately available for comment.
"I don't guess on rumors. People like to invent all sorts of information. It remains to be seen what Amazon might or might not do," said Michael Gartenberg, an analyst at Gartner. "A smartphone is different from the tablet and I think they are probably going to use the Kindle Fire as a learning experience. But what Amazon does next remains to be seen."
With Amazon preparing to sell as many as 5 million Kindle Fire devices in the fourth quarter, a smartphone could indeed be the next logical step. But the company may not be willing to sell the device at a loss. According to IHS iSuppli, it costs Amazon $201.70 to manufacture the Kindle Fire.
"The Kindle Fire, at a retail price point of $199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current $79 retail price point," said Andrew Rassweiler, senior director of teardown services for IHS. "Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle."
The Magic $199
Once again Gartenberg reserves judgment. He said no one knows for sure how much money Amazon is or isn't making on the Kindle Fire. That said, he is confident that Amazon's goal is to drive revenue from its services like Amazon Prime, cloud storage and commerce -- and he suspects the strategy will work.
"I was very impressed in my first meeting with the Kindle Fire. Amazon was extraordinarily wise to build out the ecosystem and the cloud services first. They pioneered the Appstore and the music services on other Android devices," Gartenberg said.
"All of those services were ready to go on Day One, which is far more than most Android tablets had going for them when they debuted. And getting the device down to the magic $199 price point is absolutely going to attract consumers."