Now that Amazon's (NASDAQ:AMZN) Kindle Fire tablet is
nearly a week out the door, the high-tech media can drool over the next hot
gadget rumor: the Kindle Phone.
Citigroup analyst Mark Mahaney told clients in a research
note (via AllThingsDigital) that hardware checks in Taipei indicate the
e-commerce giant will launch a smartphone in the fourth quarter of 2012. Mahaney wrote:
Based on our supply chain check, we believe FIH is
now jointly developing the phone with Amazon. However, we believe that Amazon
will pay NRE (non-recurring engineering fees) to FIH but the device and
multiple components will actually be manufactured by Hon Hai's TMS business
group (the same business group that makes Amazon's e-reader and the 8.9-inch
Amazon tablet).
We believe the smartphone will adopt Texas Instrument’s OMAP 4
processor and is very likely to adopt QCOM;s dual mode 6-series standalone
baseband given QCOM has been a long-time baseband supplier for Amazon’s e-reader.
The phone may only cost between $150 and $170 to
manufacture, with the company likely to sell it for something close to that
price, Mahaney wrote. That makes sense, considering that the Kindle Fire sells
for $199 and components analysts from IHS peg that tablet's manufacturing cost
at $201.70.
No word yet on what operating system Amazon would use for
its phone, though smart money suggests Google's (NASDAQ:GOOG) Android
platform because it's free and the company has a great comfort level with it
after using it for the Fire and building an entire application store around it.
Whatever the phone's components, cost to make and OS is, there
are plenty of proponents and opponents of a Kindle Phone.
Proponents see the
Kindle Phone as another shopping vehicle, a more mobile extension of
the
shopping-focused Kindle Fire. Imagine Amazon baking its one-click
purchasing mechanism into a phone. Consumers could point their Kindle
Phone at an item, scan it in and click a button to buy it. Amazon has
already built an augmented reality app called Flow to let shoppers use their iPhone camera to scan goods for more information.
Opponents note the obvious: the smartphone market is
crowded, cutthroat and increasingly litigious. If Amazon uses Android it will
likely have to pay Microsoft for that pleasure, as roughly a dozen companies
who have used the open-source OS for smartphones and other products have
already done.
Current Analysis analyst Avi Greengart echoed some of
those concerns, but told eWEEK he wasn't ruling out the prospect of a Kindle
Phone because Amazon clearly has broad ambitions and is building an ecosystem
of digital content and cloud services--not unlike what Apple has done with
its iPhone and iPad. Greengart wrote:
Tablets are nice to have, but phones are
necessities. However, the phone market is crowded and Amazon's primary market,
the U.S., is carrier-dominated. Just because Amazon launched a tablet does not
mean it will launch a phone, and if it does launch a phone there is no easy
guarantee of success, particularly if it intends to compete on price, as
implied by [Citigroup's Mahaney].
Competing on price works for tablets where
consumers pay the full price of the product. With phones, getting higher
carrier subsidies is key – consumers rarely see the true price of the phone.
Besides, Samsung and Apple have far greater economies of scale, and some of
their money-losing competitors are already effectively selling their devices
below cost.
Greengart's is a well-reasoned argument. The pie for the
smartphone market doesn't seem to be shrinking anytime soon, which may prove
making a phone too juicy to pass up for Amazon, which rarely misses an
opportunity to sell more goods and services.
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