We know Amazon is one for taking a loss initially to heap profits later. The prices attached to the fourth gen Kindles make one think that Amazon must surely be taking a small hit per device with the base model available for $79 (with special offers). As it turns out, maybe not.
According to an article published on blogkindle, Amazon is selling the Kindle readers at almost the same manufacturing cost. The estimates are based on internet searches but Amazon would surely be getting bulk discounts. This means that the manufacturing price may actually be lesser than estimates; in which case, further price reductions on Kindles are not impossibility. Even at the current price, Kindle customers have no reason to complain.
Andrei of blogkindle took a new Kindle 4 apart to have a look at the components and take a stab at the cost that went into making the device. The first thing of note is that the new Kindles are all heavily glued. There’s absolutely no question of servicing these models as they cannot be opened without damage – by individuals or even Amazon. That makes the devices more of a one-time use thing with hardware replacement being the only option in case of any damage. Already, we see some savings pouring in for Amazon.
Note that all price estimations are based on internet searches zeroed down on the basis of best guesses, product families, and outwardly alike parts for comparison. They are approximate but tip towards the higher side. Andrei made a component list that includes the 6″ E Ink Display ($48 or thereabouts), ARM Cortex-A8 CPU ($18), WLAN 802.11 b/g/n ($8, source is iSuppli’s breakdown of Kindle Fire), Flash – SanDisk ($2.50), memory – Hynix ($1 for bulk orders), E Ink controller ($9 approx.), Power Management Chip – Texas Instruments ($4 as on previous models), battery controller ($3.50), 30 Day Lithium polymer battery – 3.7V, 890mAh ($3), aluminum case ($8, source iSuppli again), and $10 thrown in for anything left out.
The total comes out to $113, pretty close to the $109 price of the regular base model without special offers. Since the estimates are maximum values, the actual cost could be even lesser.
Clearly, Amazon is not throwing any money away here and even the $30 discount it’s offering on the ad-sponsored model is a calculated move; it’s the minimum customers will ultimately spend on offers. The fact that a fee of $30 will rid you of screensavers and ads on the same device makes this even more believable.
So, no losses for Amazon and Kindle customers are happy too. It’s a win win.