Citigroup’s Mark Mahaney issued a bank-bill to investors saying that, according to the supply chain, the online retailer is planning on releasing a smartphone in time for succeeding year’s holiday season, equally famed by AllThingsD.
“Based on our provide chain canal checks in Asia extended by Kevin Chang, Citi’s Taipei-based hardware inquiry analyst, we consider an Amazon Smartphone will be launched in 4Q12,” the bill read.
According to the analyst, the device will exist jointly developed with Foxconn. Amazon will reportedly remuneration non-recurring engineering fees to the manufacturer, merely the phone and some of its components will exist manufactured by the same Hon Hai TMS grouping that works on Amazon’s Kindle e-readers and a rumored 8.9-inch tablet.
Amazon reportedly revealed from its usual partnership with Foxconn for the Kindle Flaming tablet in a rush to get it away the door. The fellowship is said to receive contracted Original Intention Manufacturer Quanta because the ODM could save time by piggybacking pass of mould on RIM’s BlackBerry PlayBook.
Mahaney estimates the Amazon smartphone will price between $150 and $170 to make and may sell for roughly the same amount. “For a normal brand alike HTC, they motivation to cost the product at US$243 to construct 30% gross margin. If Amazon is actually willing to lose some money on the device, the cost gap could be even bigger,” he said.
The smartphone will likely run Google’s Android mobile operating system, as the analyst suggested that Amazon will need to remuneration an “OS royalty” to Microsoft. The Redmond, Wash., software giant boasted lastly month that it has achieved patent licenses with half of the Android market. Amazon opted for Android on the Fire, simply gave the capable generator Os a customized look.
The online retailer has adopted a strategy of selling hardware at a loss as a ploy to draw customers to its message offerings. For instance, a teardown of the Kindle Flaming revealed that it costs more than its selling price.
In all likelihood, a low margin strategy from Amazon would threaten low-end smartphone makers rather than Apple’s iPhone. Backed by the world’s largest online store, Amazon may succeed the race to the underside on hardware margins because most other hardware makers won’t get sales from a robust content ecosystem to dip back on. Downward cost pressure in the tablet market from the Kindle Flaming has already resulted in a $300 cost cut for the BlackBerry PlayBook.
Apple pronounced earlier this month that it’s not apprehensive almost the Kindle Flaming because it believes the tablet will drive customers to the iPad by farther fragmenting the tablet market. Equally such, the iPhone maker may reckon the view of a Kindle telephone in the same light.
