A detailed analysis by research firm IHS iSuppli, assessing everything from the display to the battery, estimates the Kindle Fire’s bill of materials cost to be $191.65. The total production cost goes up to $209.63 when taking into consideration additional manufacturing costs.
In advance of the launch, Amazon had been reported to be considering a price of $250, making the $199 price was a surprise.
IHS iSuppli says it believes Amazon is “willing to settle for a razor-thin margin on sales of devices and digital content in order to achieve the larger goal of promoting merchandize sales at its online store.”
That’s consistent with what Jeff Bezos has said previously about tablets. “Most of our customers shop with us from desktop or laptop computers, but people have a different posture with tablets,” the Amazon CEO said at the company’s shareholder meeting this year. They “lean back on their sofa. People leaning back on their sofa, buying things from Amazon, is another tailwind for our business, so I’m very excited about that.”