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Kindle tablet? Check. Kindle smartphone? Maybe next year

Amazon could launch a smartphone in the fourth quarter of 2012, according to supply channel checks performed by Citigroup.

This isn't the Amazon Kindle smartphone. But will it look anything like this?
This isn't the Amazon Kindle smartphone. But will it look anything like this?
David Carnoy/CNET

The Kindle Fire tablet has only been available for a few days, but already Amazon could be looking to launch a smartphone, according to a new report.

According to a note from Citigroup analysts obtained by All Things Digital, Amazon is believed to be currently working (PDF) with well-known manufacturer Foxconn to develop a smartphone slated to be released in the fourth quarter of 2012.

Citi said it's basing that belief on "supply chain channel checks in Asia" led by Citi hardware research analyst Kevin Chang, who is based in Taipei. So far, Citi doesn't know what the smartphone will look like, but said it believes the device will use Texas Instrument's OMAP 4 processor. Amazon's Kindle Fire is also running an OMAP processor.

Citi said it believes the smartphone will cost Amazon between $150 and $170 to build. However, it said, rather than sell the device with a 30 percent gross margin, like many handset makers do, including HTC, analysts believe the e-commerce giant could sell the device at or near its cost.

Such a strategy wouldn't be unprecedented. In September, Piper Jaffray analyst Gene Munster said that he believes Amazon pays $250 to produce its Kindle Fire. The 7-inch, Android-based tablet is available for $199.

Citi's analysts aren't the only ones who think an Amazon smartphone could eventually launch. Last month, CNET executive editor David Carnoy argued that it's not a matter of if Amazon will launch a smartphone, but when.

"Of course, any time you get cellular technology and carriers involved, things get much more complicated," Carnoy wrote in a column on CNET last month. "But I think it's only a matter of time before you see a Kindle smartphone; ultimately, Jeff Bezos knows that his company is going to have to compete directly against the iPhone if he wants Amazon to be Apple--or even beat it."

Amazon did not immediately respond to CNET's request for comment on the Citi report.