Hope to make money on content
Amazon’s Kindle Fire is the all the rage these days and according to IHS, Amazon is losing money on each tablet it manages to shift for $199.
The bill of material cost for the Fire is estimated at $191, just $8 less than the price, which means Amazon has a rather tight margin. However, if you add manufacturing and other costs, each Fire tablet sets Amazon back about $209.
Amazon hopes to recoup the loss in the long run, selling content to Fire users. With its vast content library, the concept makes sense. Of course, the BOM cost is also subject to change. Component costs tend to drop over time and if Amazon manages to ship a lot of tablets, prices should be lower, too.
Of course, Apple boasts and equally impressive content vault and it could do the same with its iPad. It just chooses not to.