Well Amazon’s Kindle Fire certainly took the tablet market by storm with its cheapest tablet with substance tag. And as soon as it was announced, twitter was abuzz with how Amazon is making a loss to the tune of $50 per Kindle Fire sold.
We were not surprised by the speculation then at all because of the business model Amazon follows and told you exactly why Amazon would not be sweating about it all. Though now HIS iSuppli, a leading market research and intelligence firm has confirmed the fact that Amazon is indeed making a loss on every Kindle Fire it sells.
As per the teardown review done by iSuppli, the build of materials cost for Amazon is around $185.60 per Kindle Fire tab, but the total cost including all the manufacturing related expenses incurred comes down to $201.70 which is a little more than the retail price of $199.
Though IHS study of the cost only includes the manufacturing aspect and does not include expenses incurred on other activities like marketing, loyalties, software licensing etc.
This is not the first time Amazon will be selling their hardware for a loss, as per reports from HIS and others in the industry Amazon even sells their basic Kindle e-reader for a loss at $79.
Amazon’s strategy of selling hardware at a loss was never a surprise considering the fact that their money actually comes from selling paid content and apps, and the hardware is just a medium to push these.
Even mobile carriers like AT&T and Verizon adhere to the same strategy when they sell subsidized smartphones at a loss but more than make up for it via service and data contracts.
