IHS Teardown: Amazon Kindle Fire Costs $202 to Make

An IHS (formerly IHS iSuppli) teardown of Amazon’s new Kindle Fire tablet found that the company cut some corners in order to make as cheap a device as it could. Those corners include using a lower-capacity battery than competing tablets, a small quantity of DRAM, a cheap WLAN-only wireless module, and “minimal box contents.”

Kindle Fire

Kindle Fire

The company estimates the total cost of the Kindle Fire is currently US$201.70, slightly more than Amazon’s $199 price tag. The teardown resulted in a slightly lower cost to the $209 price tag IHS estimated before it had an actual unit to tear down, and it conflicts with another teardown by TechInsight that put the bill of materials (BOM) at only $143 (plus manufacturing costs).

IHS said that in order to make the device as cheaply as possible, “Amazon included a lower-capacity battery than found in the iPad from Apple Inc. or the Playbook from Research In Motion Ltd.; basic 4Gbits of low-power mobile DRAM—while many newer smartphones now feature 8Gbits; and minimal box contents.”

MOre specifically, the battery features a 16-Watt hour capacity, compared to a 20-Watt hour battery on the dead-in-the-water PlayBook, and a 24-Watt hour capacity battery on Apple’s iPad. IHS pointed out that the Kindle Fire can get away with the smaller battery because it doesn’t offer 3G capabilities and has a smaller screen. Rounding out the cost savings is the lack of camera, which was already known, and using a cheap, molded plastic case, rather than a metal case.

 “The primary factor is Amazon’s product specification choices,” Andrew Rassweiler, senior director of teardown services for IHS, said in a statement. 

The company also found that Amazon shaved a few dollars off the cost of the device by using WLAN-only wireless module, rather than a WLAN, Bluetooth, and FM radio combo unit. Apple doesn’t offer an FM radio in its iPad, either, but the feature is available on some Android devices.

Another interesting aspect of IHS’s report is the suggestion that Amazon has been able to get better component supply deals because manufacturers have grown somewhat antsy to find someone, anyone, who can turn the iPad market into a tablet market.

With media tablets from other companies failing to live up to expectations in recent months, Amazon’s relative clout among component suppliers has risen,” Mr. Rassweiler said. “Suppliers are interested in finding the next ‘rock star’ tablet that will allow them to sell millions of components for a single device. As a result, these suppliers are willing to cut better deals for Amazon.”

At the heart of this low-cost approach to offering a tablet is the ability to sell more products and services through the Kindle Fire. With each device losing money at the point of sale, especially for devices sold through third party retailers, Amazon is hoping to make up those losses by selling more digital content and physical goods to users of its tablets.

If the company finds that its Kindle Fire customers will buy a significant quantity of such products and services that they wouldn’t have otherwise bought, the device could be a significant money maker for the company.