A recent teardown of Amazon’s new Kindle Fire tablet reveals that the company is likely selling its new Android-powered slate at a loss. Market research and intelligence firm IHS iSuppli on Friday published its findings after disassembling the new Amazon Kindle Fire tablet and examining its components. Following its analysis, the firm determined that Amazon’s Build of Materials cost is $185.60, and its total cost including manufacturing-related fees is $201.70 per Kindle Fire. Prior to obtaining and disassembling the tablet, IHS had estimated its parts and manufacturing costs to be $209.63 per unit combined. Read on for more.

“The Kindle Fire, at a retail price point of $199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current $79 retail price point,” Andrew Rassweiler, senior director of teardown services for IHS, said in a statement. “Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle. This is a similar business model to wireless companies such as AT&T or Verizon. They sell you a phone that costs them $400 to $600 or more to make for a price of only $200. However, they expect to more than make up for that loss with a two-year service contract.”

IHS notes that its determination covers parts and manufacturing only, and does not take into account software, licensing, marketing, royalties and other related expenditures. The firm’s full press release follows below.

Amazon Kindle Fire Costs $201.70 to Manufacture

November 18, 2011
ANDREW RASSWEILER

Amazon’s Kindle Fire media tablet carries a BOM cost of $185.60, according to preliminary findings from the IHS iSuppli Teardown Analysis Service. When manufacturing services expenses are added, the cost increases to $201.70, as shown in the table below.

This is slightly lower than the IHS virtual estimate of the Kindle’s cost issued in September of a BOM amounting to $191.65, and a total of $209.63, when factoring in the manufacturing and the margin expenses.

Please note that this teardown assessment is preliminary in nature, and accounts only for hardware costs and does not include additional expenses such as software, licensing, royalties or other expenditures.

“The Kindle Fire, at a retail price point of $199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current $79 retail price point,” said Andrew Rassweiler, senior director, teardown services for IHS. “Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle. This is a similar business model to wireless companies such as AT&T or Verizon. They sell you a phone that costs them $400 to $600 or more to make for a price of only $200. However, they expect to more than make up for that loss with a two-year service contract.”

Surprise design wins in the Kindle fire include the use of a touch screen control- integrated source from the previously unknown source Ilitek and a wireless local area network (WLAN) module from new supplier Jorjin.

The use of an unfamiliar source for the touch screen controller integrated circuit (IC) reflects the growing trend of new suppliers entering the market. Amid booming sales for touch screen devices, IC suppliers have jumped into the fray to satisfy the increase in demand. This trend toward employing lesser-known sources is evident in recent designs including the Vizio tablet, which featured a touch control IC from EETI—and the Lenovo A60 smartphone, which employed a touch control IC from FocalTech Systems.

The use of the Jorjin WLAN module also represents a surprise, given that most tablet designs employ more complex combo solutions from Broadcom or Texas Instruments. The Jorjin device provides a cheaper approach to implementing WLAN support, at just $4.50, yielding a $1 savings in BOM costs.

Texas Instruments Inc. (TI) dominates the Kindle Fire design. Most notably, TI contributes the applications processor, which provides the core functionality of the tablet. The TI OMAP4430 processor costs $14.65, accounting for 7.9 percent of the Kindle Fire’s total BOM. However, TI also supplies other devices, including the power management device and the audio codec. This gives TI a total of $24 per each Kindle, or 12.9 percent of the BOM.

TI’s OMAP4430 applications processor has been identified in an increasing number of designs dissected by the IHS, including Research In Motion’s PlayBook RDJ21WW tablet, as well as the Motorola Droid Bionic XT875 and LG Optimus 3D P920 smartphones. The OMAP4430 is a dual-core ARM Cortex-A9, 1GHz processor with a IVA 3 Hardware Accelerator and a SGX540 3D graphics core. The device supports 1080P 2-D and 720P 3-D graphics, and is produced using 45nm process geometry.

The single most expensive subsystem in the Kindle Fire is the display and touch screen, at a combined cost of $87.00, or 46.9 percent of the BOM. Amazon sources the display from two companies: LG Display and E Ink Holdings. The display uses E Ink’s FFS technology, which LG Display has licensed.

Improved production yields and efficiencies have assisted greatly in reducing the cost of FFS tablet displays. In the same vein, touch screens have made big strides in cost reduction during the course of 2011.

The Kindle Fire incorporates 8 gigabytes of eMMC NAND flash memory. In the individual Kindle Fire torn down by IHS iSuppli, the NAND flash was supplied by Samsung. The eMMC NAND flash is fairly popular with most manufacturers, as it includes memory management circuitry.

IHS had assumed originally that the Kindle Fire might have as much as 8 gigabits of low-power DDR2 DRAM memory. In fact, the Kindle Fire ships with only 4 gigabits. This shaved off a few dollars from our previous cost estimates. Elpida was the supplier of the DRAM in the individual Kindle Fire torn down by IHS iSuppli.

Together, the NAND and DRAM form a memory subsystem costing $22.10, or 11.9 percent of the total BOM.

Apple is looking at another big-margin device launch next week when the tech giant’s fifth-generation iPhone finally hits store shelves on October 14th. Market research and intelligence firm UBM TechInsights on Wednesday estimated that Apple’s 32GB iPhone 4S carries a materials cost of $203 per handset for the Cupertino-based company. UBM arrived at that number by using component costs from its iPhone 4 teardown as a base and then making slight adjustments for known changes in iPhone 4S components, such as the new A5 processor. Apple’s Canadian website states that the MSRP for its iPhone 4S starts at $649 (CAD, though Apple’s pricing in Canada and the U.S. are aligned in most cases), so presuming the company will stay true to form and add $100 to the MSRP of the 32GB model, Apple is looking at a margin of roughly $546 when taking only build of materials (BOM) into account. After additional expenses, however, Apple still looks to have another solid money-maker on its hands. UBM TechInsights’ full press release follows below.

UBM TechInsights Commentary: Apple Maintains Profit Margin While Introducing Few Technology Changes

Extensive database of teardowns and trends analysis aid in the speculation of cost of the iPhone 4S

OTTAWA, Ontario, Oct. 5, 2011 /PRNewswire/ — UBM TechInsights, leveraging its extensive library of teardowns and semiconductor analysis, has taken a closer look at the iPhone 4S announcement and is issuing an estimate of the cost of the phone.  When taking into account current market prices, the iPhone 4S will achieve the same healthy profit margin that they have experienced in previous iPhone launches.

“Technology-wise, you aren’t seeing anything revolutionary or unexpected from the iPhone 4S,” says Jeffrey Brown, Vice-President of Business Intelligence. “As we predicted in July, the iPhone 4S is a moderate improvement over the iPhone 4 – featuring an A5 processor that has been in use for approximately nine months, an image sensor that puts the handset on par with its competitors, and improved battery life.”

The introduction of the iPhone 4S across GSM and CDMA networks in a singular design was also alluded to in the introduction of the Verizon model of the iPhone 4.  ”When the CDMA version of the iPhone 4 was brought to market, it featured a Qualcomm baseband modem that was capable of working across both networks,” says Jeffrey Brown.  ”This was the single biggest indicator that Apple was moving towards a ‘world phone’ that would reduce design times and production costs.  We expect the new antenna design to be very similar to what we saw in the CDMA version of the iPhone 4.”

UBM TechInsights Vice-President of Technical Intelligence, David Carey, views today’s announcement of the iPhone 4S as par for the course for Apple.  ”Just as we saw a modest technology bump from the iPhone 3G to the iPhone 3GS, Apple is adopting the same model of iterative improvement and incrementalism as they gear up for the iPhone 5 platform.  By continuing down the hardware evolution path, more powerful and useful software such as natural voice-recognition, highly-rendered gameplay, wireless video mirroring, and complex image processing all become possible. The software experience – enabled by ‘good-enough’ hardware – is arguably what customers care about most in the end.”

Using previous costing history and estimates on the major components of the iPhone 4S, UBM TechInsights estimates the bill-of-materials to be in the same range at where the iPhone 4 model was at launch in mid-2010.  Using preliminary specs and cost analysis, we estimate the 32GB model of the iPhone 4S will have a BOM of $203 at launch.  This estimate includes an estimated cost of $26 for the Apple A5 processor and $31 for the retina display.

For more information on the costing of the iPhone 4S and how it compares in pricing in today’s market to the iPhone 4, please contact UBM TechInsights for a comparison table highlighting the costs of key components.  For more information on the iPhone 4 teardown visit: http://www.ubmtechinsights.com/teardowns/apple-iphone-4-teardown/

UBM TechInsights will be conducting a comprehensive teardown of the iPhone 4S, including detailed information on many of the key components and semiconductors and confirmation of our earlier costing estimates.  Visit www.ubmtechinsights.com on October 14th for the iPhone 4S teardown.

Amazon will reportedly turn a profit of approximately $49 for each Kindle Fire it sells following the device’s launch next month. Earlier rumors painted a very different picture of Amazon’s strategy with its first media tablet, suggesting the retailer would be selling the slates at a loss of between $10 and $50 per device. The theory, these reports claimed, was that Amazon hoped to make up the difference and then some thanks to deep integration with paid Amazon services such as Amazon Video On Demand, the company’s popular MP3 music store and its Kindle eBook store. According to market research and consulting firm UBM TechInsights, however, these reports are not accurate. In fact, the firm says Amazon is looking at a sizable 25% profit margin on the device despite its low end user pricing. Read on for more.

Using estimated component costs of Research In Motion’s BlackBerry PlayBook as a point of reference — the Quanta-designed Kindle Fire is, after all, basically the same tablet in terms of hardware — UBM TechInsights was able to piece together what it believes to be a fairly accurate breakdown of Amazon’s cost on the Kindle Fire.

According to the firm, the 16GB version of RIM’s PlayBook carries a cost of $170 per unit. Cut $10.50 for the camera system, $1 from the cost of radio components, 50% from the cost of memory since the Fire only includes 8GB of storage, and $2 from the cost of various sensors, and you’re left with a $150 tablet that Amazon is selling for $199. Add to that profit from Amazon Prime subscriptions, Amazon Appstore app sales and money made from Amazon’s numerous other services, and the Kindle Fire is shaping up to be a solid moneymaker for the emerging tablet vendor.

Strategy Analytics projects that Amazon will sell more than 15 million Kindle Fire tablets by the end of 2013. The Kindle Fire begins shipping on November 15th.

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It could very well be that Android’s best hope for a competitive tablet offering in the near term lies in Amazon’s hands. Retrevo Labs, a division of consumer electronics shopping site Retrevo, surveyed more than 1,000 U.S. consumers in June to find out what people are looking for in a tablet. While 50% of those surveyed who intended to purchase a tablet this year said it would be an iPad, Retrevo determined that the most important feature to prospective tablet buyers is a low price point. Considering the unlikelihood of Apple budging when it comes to price, Android tablets have a clear opportunity to attack the market at more affordable price points. Among those brands that respondents would seriously consider buying a tablet from excluding Apple, Amazon was given the nod by 55% of those surveyed, followed by Samsung and Dell at 38% each. BGR reported exclusively that Amazon is working on two tablets it hopes to launch in 2011, a dual-core slate codenamed “Coyote” and a quad-core beast codenamed “Hollywood.” And as we discussed in a recent podcast, we think Amazon has the best chance to make some serious waves in the still-emerging tablet space. Amazon has several content ecosystems that will be at the core of its tablet offering such as the Kindle eBook store, a streaming movie service, its cloud locker service for streaming music and, of course, the Amazon Appstore. If deeply integrated into a customized Android build, these content channels could combine to produce a rich, comprehensive tablet experience. Additional graphs from Retrevo’s study follow below.

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Apple, AT&T, and Verizon Wireless have independently fired off press releases letting us know exactly how and when we can acquire yourself an iPad 2 tomorrow, March 11th. Starting at 5:00 p.m. local time, interested parties can head to an Apple, AT&T, or Verizon Wireless retail store to purchase the 16GB, 32GB, or 64GB tablet in white or black. Verizon will be offering four data plans for the iPad 2:

• 1GB per month – $20
• 3GB per month – $35
• 5GB per month – $50
• 10GB per month – $80

While AT&T will be offering just two in both the pre-paid and post-paid formats:

• Monthly statements:  $14.99 for 250 MB or $25 for 2GB.  Customers who exceed their monthly data allotment will be billed $14.99 for another 250MB on the $14.99 plan or $10 per 1 GB of overage on the 2 GB plan [AT&T is offering consumers who choose monthly statement billing one free month of service].
• Credit card billing:  $14.99 for 250 MB or $25 for 2 GB.  Customers who exceed their monthly data allotment may choose to purchase another 250 MB on the $14.99 plan or purchase an additional 2 GB for $25 on the 2 GB plan.

All models of the iPad 2 — Wi-Fi and 3G — will also be available at Apple retail stores and select Walmart, Best Buy, Sam’s Club and Target stores nationwide starting at 5:00 p.m. AT&T and Verizon stores will only carry GSM and CDMA iPads respectively. If you’re not inclined to hit up a retail outlet, but are still interested in the tablet, AT&T and Apple will begin selling the iPad 2 online at 1:00 a.m. Pacific Time (4:00 a.m. Eastern) on the 11th. There you have it, if you’re jones’ing to get yourself an iPad 2, start formulating your game plan.

Read [Apple] Read [AT&T] Read [Verizon Wireless]

Thanks to several leaks, we have a pretty good beat on what Motorola’s ATRIX 4G will retail for — $150 — and now, according to some new intel, we’re starting to get an idea of what the handsets accessories could cost. According to a page posted by online wireless retailer Fommy, the ATRIX’s HD multimedia dock — complete with HDMI-out and three USB ports — will set you back a very reasonable $59.95. If earlier rumors about the ATRIX 4G’s laptop dock turn out to be true, you can get yourself a 4Gish, dual-core, super phone complete with a multimedia and laptop dock for around $360 on-contract. While that isn’t a small amount of cash, it is much cheaper than purchasing a smartphone and netbook with the associated wireless contracts separately. What do you think? Do any of you plan on purchasing the ATRIX trifecta when available?[Via Gizmodo]

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On Friday, we told you about a rumor we were hearing surrounding the release-date and pricing for Sprint’s ZTE Peel; the iPod touch case that provides 3G internet access. Today, we’ve got cold hard evidence to confirm our previous scoop. As you can see from the above screen shot, the ZTE Peel will indeed be hitting the Now Network on November 14th and will retail for $79.99. The plan that Sprint will provide Peel customers is a $29.99, month-to-month, offering that will include a 1GB data allowance; overages will be billed at $0.05 per megabyte. The Wi-Fi case will be able to provide internet access for up to two devices and supports second and third generation iPod touch devices. Although… we do have to wonder if Sprint/ZTE will delay the current Peel as it is not compatible with the fourth generation iPod touch; most notably, the camera is in a different location.

What do you think iPod touch owners, you like?

Today, during their Q3 2010 earnings call, WiMAX network operator Clearwire announced that it would be slashing 15% of its workforce and instituting several “cash conservation measures” in an attempt to raise “short-term funding.” As the earnings brief reads:

While the Company is cautiously optimistic it will resolve its short-term funding needs in the near future, there can be no assurances. Thus, it is implementing a series of significant cash conservation measures to reduce costs, including: a substantial reduction in sales and marketing spending, a suspension of additional retail channel market launches of the CLEAR-branded operations in select markets including Denver and Miami, delays in the introduction of CLEAR-branded smartphones, a substantial reduction in the contractor workforce, a 15% reduction in the number of employees, and the discontinuation of development activities for sites not required for its current build plan. The Company currently has thousands of sites in various stages of planning and construction beyond its current build plan, and it intends to suspend zoning and permitting in a portion of those sites until such time as additional funding becomes available. These contemplated initiatives are intended to result in potential cost savings of between $100 million to $200 million in 2010 and again in the first half of 2011.

That certainly doesn’t sound good. We contacted Sprint for comment — as their 4G network depends on Clearwire — and they were kind enough to provide us with a statement. Hit the jump to read Sprint’s take on Clearwire’s situation.

Dan Hesse recently stated that Sprint has been in discussions with Clearwire regarding the financial status of its ongoing operations as well as Sprint potentially providing new financing. We expect those discussions to continue as we review alternatives with Clearwire. There is no assurance that the discussions will result in any transaction with Clearwire.  Sprint is providing no additional comments on this matter at this time.

At Sprint, our 4G plans remain unchanged:
• Sprint has demonstrated unparalleled leadership in 4G.  This dates back to our technology selection in 2006 and includes over two years’ experience running a 4G network which now covers 80 million people in over 60 markets.  We will continue to demonstrate network leadership and innovation in 4G in the years to come.
• This leadership has resulted in increased market share, especially in iconic devices like the EVO and Epic 4G.  Sprint currently offers a dozen 4G devices and is on its third generation of several 4G devices before the competition’s launch of a single device.
• While our leadership will resolve these matters, Sprint’s sales teams and retail associates will remain focused on leveraging 4G to enrich the lives of our customers and deliver solutions that save businesses time and money.

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Analytics company iSuppli has completed their analysis of Apple’s sixth-generation iPod nano. The company concludes that the small, square, touch-screen media player costs the Cupertino company $45.10 to manufacture; $43.73 in materials and $1.37 in manufacturing costs. The most expensive components on the device are the 8GB of NAND Flash memory ($14.40), the display ($11.50), and the Samsung processor ($4.95). Apple sells 8GB model of the device for $149. Not a bad profit margin, eh?

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The Wall Street Journal is reporting that BlackBerry maker Research In Motion sold right around 150,000 Torch handsets during its opening weekend. The sales estimates come courtesy of RBC Capital Markets and Stifel Nicolaus. Curiously, the launch numbers keep being compared to the first weekend sales figures of the iPhone 4; which launched on June 24th of this year in five countries and on multiple carriers. The WSJ also calls into question the profitability of the handset for RIM. Research firm iSuppli pegged the cost of the slider’s components at right around $171 — with an additional $12 for manufacturing — bringing the total to $183. The LCD and Samsung flash-memory are the unit’s two most expensive parts and cost approximately $35 each. As a point of comparison, iSuppli estimates Apple’s iPhone 4 at $188 and the HTC DROID Incredible at $165. When compared component for component, the Torch’s part costs do seem a little steep. Again, the numbers are all speculative… but 150,000 seems to be an acceptable result for an opening weekend release on one carrier, no? What do you think?

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In a note to investors, Morgan Stanley analyst Katy Huberty predicts that Apple will introduce a new iPhone model which will set a new standard for affordability. Huberty maintains that cost is the largest barrier to greater iPhone adoption and believes Apple will address this shortcoming during its next iPhone announcement expected at WWDC in June. Whether Apple can undercut the low $99 price point for the 8GB iPhone 3G remains to be seen, but Huberty’s prediction takes into account the total cost of ownership, not just the initial handset cost. Apple could potentially trim the overall cost of its handset by negotiating low monthly data rates with carriers as it did with iPad, reducing the length of the contract, eliminating any upfront costs like activation fees, or even offering the iPhone as a standalone device with the option of a prepaid plan as has been done recently with the SIM-only tariffs in the UK. The latter, of course, would only happen if hell freezes over if Apple and AT&T are willing to loosen their grip on the iPhone in the US. Then again, we’ve taught better than to take what analysts say as fact.

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iSuppli is certainly the authority when it comes to pegging manufacturer costs in the world of handsets, but its latest report has a giant question mark stamped on the cover. Without actually having a handset on hand, the firm has placed Palm’s cost at approximately $138 per unit to build the Pre. Now, we know iSuppli knows its stuff but we have to take issue with the fact that it reached this conclusion without actually, you know, having a Palm Pre on hand to analyze. Instead, iSuppli based the majority of its calculations on assumptions. Educated assumptions, yes, but assumptions none the less. Regardless, it’s safe to say that the firm is certainly in the right ballpark and the Pre will likely cost much less to build than the iPhone, which runs Apple about $174 per unit. Even if iSuppli’s numbers are 10 percent off on the low end, Palm is still looking at doubling down with each unit sold. Not bad, not bad at all.

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It’s a recession people, and in a recession the name of the game is to keep sales as steady as possible while reducing costs as much as possible. For countless companies this means unloading employees but as RIM’s market share continues to surge, the Canadian handset maker is taking a different approach; use its solid sales to squeeze better prices out of its suppliers. Based on iSuppli’s estimates, BlackBerrys do have a fairly substantial cost to RIM with the Bold running the company approximately $170 per unit and the Storm running about $203 per unit. Considering the volume we’re dealing with here, if RIM can knock even a few pennies off the cost of certain parts the result will be huge. RIM Co-CEO Jim Balsillie stated recently that the company’s efforts to lower costs will be felt this quarter, meaning it is already making some good headway. We can only hope that reduced cost doesn’t translate into reduced quality — it would be hard to find even the most avid BlackBerry fanboy who would deny that BlackBerry devices don’t exactly top the charts where build quality is concerned. If suppliers are forced to lower their prices to accommodate pressure from RIM, something has to give lest they eat into their own profits.

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Yesterday we relayed the news that Sony’s Playstation 3 sales for the holiday period were lower than expected, yet Sony was remaining optimistic. Apparently, some good news on the production front sheds some light on how the company can manage to keep its chin up amidst some pretty terrible sales performance. iSuppli has broken down the production cost of Sony’s latest PlayStation 3 and Sony has reportedly shaved 35% off the cost of the original PS3 unit. Through changes to various components and integration, Sony has cut the price of manufacturing the PS3 console from $690.23 to $448.73. By integrating components into the core silicon of the PS3, Sony has also reduced the number of parts used from 4,048 in the previous-generation 60GB model to a modest 2,820 in the current model. With further changes and improvements, iSuppli estimates that Sony could soon be breaking even – perhaps just in time for that much anticipated price cut we’ve all been waiting for.

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