Amazon’s Kindle 4: Manufactured for $84 but Sold for Profit
Some blogs are currently reporting that Amazon is losing money on the production of the Kindle 4. In reality, the opposite is likely true. iSuppli has calculated the production costs of the Kindle 4 at 84 US dollars. In the US, the reader regularly costs 109 US dollars. Thus, with shipping and service, Amazon is most likely not making a loss on these sales.
The situation is tighter for the ad-supported version. Amazon sells the “Special Offers” model for 79 US dollars, which at first glance appears to be a 5 US dollar loss. However, some of our colleagues in other blogs seem to forget that advertising does bring in money. The only question is: how much?
Since Amazon already gained experience with ads on its reading devices with the previous model, and has since expanded the system further, it’s reasonable to assume that even the 79 US dollar version is at least breaking even in production costs.
The situation looks more interesting with competitor Barnes & Noble. The bookseller has reduced the Nook Touch price to 99 US dollars to keep up with Amazon’s competition. However, the Nook features a touchscreen and expandable storage. Furthermore, using Android might require a licensing fee to Microsoft. Yes, you read that right, Microsoft. The software giant collects licensing fees from Android users due to potential patent infringements. It should also be noted that Barnes & Noble produces the Nook Touch in substantially lower volumes, likely resulting in higher material costs. All things considered, Barnes & Noble seems to be taking a significantly riskier approach than Amazon.
The costs of the Kindle 4 in detail:
- Display Module: $30.50
- Mainboard: $30.37
- Others: $15.08
- Packaging Content: $2.06
- Various Controls: $0.59
Total Material Costs: $78.59
- Assembly: $5.66
Total: $84.25
