Kindle Fire costs US$201 to make – Amazon can afford to be generous

18 Nov 2011

Amazon’s newly released Kindle Fire media tablet has a bill of materials (BOM) that amounts to US$185.60 but which rises to US$201.70 when manufacturing expenses are added, IHS iSuppli has revealed, which means at a retail price of US$199, Amazon is selling the device at a loss.

But Amazon can afford to be generous – think of such devices as a portal for additional revenues for the e-commerce powerhouse through sales of e-books, music and apps.

“The Kindle Fire, at a retail price point of US$199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current US$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 US$400 to US$600 or more to make for a price of only US$200. However, they expect to more than make up for that loss with a two-year service contract,” Rassweiler said.

Surprise design wins in the Kindle fire include the use of a touchscreen 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 touchscreen controller integrated circuit (IC) reflects the growing trend of new suppliers entering the market.

Amid booming sales for touchscreen 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 US$4.50, yielding a US$1 savings in BOM costs.

Texas Instruments 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 US$14.65, accounting for 7.9pc 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 US$24 per each Kindle, or 12.9pc 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 touchscreen, at a combined cost of US$87, or 46.9pc 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, touchscreens 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 IHS’s 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 US$22.10, or 11.9pc of the total BOM.

John Kennedy