Recently Andrei managed to thoroughly break a perfectly good new Kindle 4 in his quest for ever more complete understanding of what’s going on inside our favorite devices. The information and photos accompanying these posts got me thinking about Amazon’s new pricing gambit. There’s a lot of focus right now on how cheap the Kindle Fire is being sold at, especially in light of the fact that recent reports have Amazon selling it at a loss, but nobody is really talking much about the fact that there is now a fully functional eReader connected to a major platform available for only $80.
Are they still making any money at all, or is this Kindle even more heavily subsidized than the Fire? Let’s look into it a bit. I’m not claiming any inside information beyond a working knowledge of searching the Internet, but what I found was fairly interesting. The component list is based on the disassembly I mentioned:
- 6″ E INK Display – ED060CF(LF)T1 REN60B7075(C62)
- ARM Cortex-A8 CPU – MCIMX508CVK8B N78A 8TFC1130E
- WLAN 802.11 b/g/n – Atheros AR6103T-BM2D 26AR0620.142D PAF284.1B 1126
- Flash – SanDisk SDIN502-2G
- Memory – Hynix H5MS2G22AFR E3M 129A
- E INK Controller(?) – Winbond W25Q40BV
- Power Management Chip – Texas Instruments SN92009 A4 TI 18IG2 AOR5 G4
- Battery Controller – Freescale MC13892AJ CQQD129D
- 30 Day Lithium Polymer Battery – 3.7V, 890mAh, MC-265360
- Aluminum Case
Some of this was hard to find. Other bits, like the Atheros AR6103T, don’t really seem to exist as far as the internet is concerned. Where necessary I’m using best guesses, product families, and superficially equivalent parts for comparison. After a bit of inquiry, here are the numbers I’m coming up with:
- Display: $48 (Based on similar 6″ E INK Displays, no bulk pricing calculations)
- CPU: $13
- WLAN: $6 (Based on Kindle Fire breakdown by iSuppli. May be cheaper here since performance matters less)
- Flash: $2.50 (Assuming similarity with previous models)
- Memory: $1 (Researched as low as $0.01 in bulk orders. Rounding up)
- E INK Controller: $9
- Power Management: $4 (Assuming similarity with previous models)
- Battery Controller $3.50 (Rounding up from $3.32/1000 units. Probably cheaper in batches of millions)
- Battery: $3
- Case: $5 (Assuming slightly more expensive than older Kindle models based on materials used)
- Manufacturing Costs: $8 (Based on iSuppli Kindle Fire breakdown)
- Other Materials: $10 (I’m sure I missed something)
- Total Costs: $113
Given that I have done my best to be extremely conservative in these estimations, this should probably be considered an upper limit of the actual device costs. Amazon will probably be quite a bit better at finding component discounts at this point than I am after my 48 hours or so of experience. Even so, given that the basic model with no Special Offers integration is going for $109, I think I got pretty close.
One of the biggest things that I think we have to keep in mind with this new Kindle is that there is every indication this device is not meant to be serviced under any circumstances. According to multiple reports so far, it is almost impossible to open the case without damage even if you know exactly what you are doing. Even if that is accomplished, there was more glue used in this Kindle than makes sense. It is clearly not meant to be serviced, either by customers or by Amazon themselves. That means it has to be cheap enough for outright replacement of the hardware in the case of necessary servicing, with salvaging of little more than the E INK screens likely.
With this information, I think it is safe to say that Amazon won’t be throwing any money down a hole by subsidizing the Kindle 4. They have gone above and beyond to build a new generation of the line that is far more cost effective than before while still offering maximum reading functionality. Some money was definitely able to be saved by the exclusion of audio and touchscreen capabilities as well, of course.
The largest expense remains the E INK screen, but since this is the essential component of what makes a dedicated eReader worth having, it is hard to underestimate the importance. You really can’t do without it and as yet I haven’t heard of any worthwhile substitutes. For the moment this may mean that any further price drops will rely on the success of Kindle-based advertising. With the baseline model already available for under $100, though, there’s not really much room left to complain about price.
Verdict: Amazon doesn’t loose money on Kindle 4 non-touch. Even with retail component prices, manufacture costs come very close to what device sells for. Kindle with special offers has been around for a while so it is safe to assume that Amazon know how much money they are going to make from advertising in the long run and it is reflected in $30 discount and the fact that you can remove special offers from your device for the same price of $30. It also seems that there is still room left for price reductions in the future.