Amazon Prepares a Smartphone

It seems that lately, Amazon becomes a synonym for “success”: after the exceptional sales of their e-book reader, Kindle, it foresees a good season for Kindle Fire tablet, but also the launch of a smartphone under the same brand!

The information comes from the research department of Citigroup, which recently published a note by Mark Mahaney: “Based on our supply chain channel checks in Asia led by Kevin Chang, Citi’s Taipei-based hardware research analyst, we believe an Amazon Smartphone will be launched in 4Q12.”

Mahaney adds that Amazon would develop the smartphone together with the producer Foxconn. Thus, Foxconn will develop the concept of the smartphone and will receive the NRE fees (non-recurring engineering fees) from Amazon, while the execution part will come to TMS division of Hon Hai Group (the same that produced the e-reader and the tablet for Amazon).

According to Citigroup’s predictions, the smartphone will be based on a processor powered by Texas Instruments and a 6 Series dual core chip from Qualcomm (traditional supplier to Amazon).

Mahaney’s estimates led to a production cost of about $150 to $170, the analyst stating that a competitive sale price should be close to this amount. “For a normal brand like HTC, they need to price the product at US$243 to make 30% gross margin. If Amazon is actually willing to lose some money on the device, the price gap could be even bigger,” said Mahaney.

Although he doesn’t specifies whether the smartphone will use Google’s Android OS, but suggests this stating that Amazon will have to pay royalties to Microsoft for the operating system – given that Microsoft has obtained this fee in justice from the hardware partners that are using Android.

Speculations about pricing are perfectly real, considering that Amazon decreased the price of their Kindle Fire tablet to only $199 and expects sales of five million units in Q4. According to iSuppli, this price would be lower than production costs, given that components’ price would be only $185.

The future Kindle Phone would have to be another “sales vehicle”, a mobile extension of the website, additional to Fire tablet. According to the scenario, the phone may integrate an application that will scan the desired product on the website and to buy it through a single touch.

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