Amazon is losing money on every Kindle Fire that it...

and the total manufacturing cost comes to $201.70 after factoring in manufacturing services expenses, IHS said Friday. Amazon didn’t comment on the report’s findings. But comments made by Chief Financial Officer Thomas Szkutak in an earnings call last month provided a sign that the company wasn’t going to be making much, if any, profit from hardware alone from selling the Fire or its other new Kindle devices (WID Oct 27 p10). When Amazon thinks about “the economics of the Kindle business, we think about it in totality,” he said. “We think of the lifetime value of those devices. So we're not just thinking about the economics of the device and the accessories. We're thinking about the content,” too, he said. The Fire “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, IHS senior director, teardown services. “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,” he said. That’s “a similar business model to wireless companies” including AT&T and Verizon Wireless, he said. “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.” The BOM and manufacturing cost figures provided by IHS on Friday were slightly lower than the preliminary estimates that the research company made in late September, before the tablet shipped. IHS then estimated the Fire carried a BOM of $191.65 and a total cost of $209.63 when factoring in the manufacturing and margin expenses (WID Oct 3 p9). “Surprise design wins” in the Fire included the use of a touch-screen control-integrated source from the previously unknown Ilitek, and a wireless local area network module from new supplier Jorjin, IHS said. The use of an unfamiliar source for the touch-screen controller integrated circuit “reflects the growing trend of new suppliers entering the market,” it said. “Amid booming sales for touch screen devices, IC suppliers have jumped into the fray to satisfy the increase in demand.” The trend was also shown in recent designs including a Vizio tablet featuring a touch-control IC from EETI and the Lenovo A60 smartphone that used a touch-control IC from FocalTech Systems, IHS said. The Jorjin device provided Amazon with “a cheaper approach to implementing WLAN support, at just $4.50, yielding a $1 savings in BOM costs,” IHS said.