Kindle Fire teardown puts build cost at less than $3 above retail price

Amazon to make up loss with product sales through its $199 tablet

The Kindle Fire tablet
The Kindle Fire tablet from Amazon.com.

Teardown experts at IHS iSuppli found that it costs $201.70 to build Amazon's new Kindle Fire -- that's almost $3 more than the device's $199 retail price.

Many analysts expected Amazon to take a much larger loss on the Kindle Fire, if only to better compete against other tablets such as the iPad 2, which has a starting price of $499, or the Nook Tablet, which starts at $249. Amazon is expected to make up the loss through sales of products and apps to Kindle users.

According to iSuppli's tally the Kindle Fire's hardware costs $185.60 and the cost of manufacturing the device is $16.10.

The $201.70 figure is an actual teardown cost estimate that was derived from taking apart one of the Kindle Fire tablets, which were released Monday. That total is $7.83 less than the $209.63 virtual estimate that iSuppli made in September.

As is the case with most tablets, the display and touchscreen are the biggest costs in the latest estimate, adding up to a rounded total of $87. The memory, processor, wireless LAN radio and other peripherals cost $64.45, while the cost of the battery was put at $16.50. The case was $14.40 and the box contents were $3.25.

Andrew Rasseiler, senior director of teardown services at iSuppli, said Amazon isn't making money on hardware sales but on the paid content and other apps it is selling to users of the device.

ISuppli said the processor is a 1GHz Texas Instruments OMAP 4430 dual-core model that costs $14.65, which is 7.9% of the total. That processor is also used in the BlackBerry PlayBook tablet and the Motorola Droid Bionic and LG Optimus 3D smartphones.

ISuppli said its virtual estimate included the assumption that the Kindle Fire would have 8GB of DDR2 DRAM memory. However, the device actually ships with just 4GB of memory, supplied by Elpida. That difference shaved off a "few dollars" from the earlier estimate, the firm said.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

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