The Kindle Fire tablet costs $209.63 for materials and manufacturing expenses, more than $10 above its $199 pricetag, according to a virtual estimate by IT research firm IHS iSuppli.
Even so, iSuppli said Amazon.com is expected to sell enough digital content with each Fire tablet to generate a marginal profit of $10. iSuppli didn't estimate what Amazon will sell outside of digital content, since physical goods comprise the majority of Amazon's business.
"The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content," iSuppli said in a statement. "Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon's business."
By physical goods, iSuppli noted that Amazon generates its profits on sales of "shoes, diapers and every other kind of physical product imaginable."
iSuppli said "the importance of this strategy cannot be underestimated," and that "no retailer has managed to create an umbilical link between digital content and a more conventional retail environment. With Kindle [Fire], Amazon has created the most convincing attempt at this yet."
The Kindle Fire is not so much a low-cost tablet as a "super e-book reader," iSuppli said, although it said the device will be successful and potentially will become the No. 2 selling tablet after the iPad, which sells at a starting price of $499.
The Kindle Fire goes on sale Nov. 15 , and iSuppli said it plans to conduct a complete physical teardown of the tablet at that time.
The preliminary cost of the Kindle Fire, plus manufacturing fees, includes $87 for the 7-in. display and touchscreen, the most expensive component. The circuit board costs $70.40 and memory is $25, IHS said.The The Fire's processor is likely a dual-core chipset, which costs $15, iSuppli said.
The research firm also noted that Amazon likely saved costs by hiring Quanta Computer in Taiwan to manufacture the Kindle Fire. Quanta is the same company that makes the PlayBook tablet for Research in Motion. "Because Quanta engages in product design, it likely is repurposing much of the expertise it gained from developing the PlayBook for use in the Kindle Fire." Another company that conducts product teardowns, UBM TechInsights, reportedly estimated the cost of Kindle tablet materials at $150, with about $10 more for manufacturing costs, according to the Wall Street Journal . TechInsights could not be reached for comment.
The biggest difference is that TechInsights put the cost of the touchscreen and display at $60, which is $27 less than iSuppli's estimate. iSuppli also listed $11 for the plastic case making up the body of the Fire, while TechInsights didn't break out that item, the WSJ noted.