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Amazon takes a slight loss on each Kindle Fire, study says

An IHS iSuppli study shows that the build of material and manufacturing costs is just a little more than the tablet's retail price of $199--and lower than what the firm previously believed.

Amazon Kindle Fire
Sarah Tew/CNET takes a hit with the sale of each Kindle Fire, but the loss isn't as bad as initially thought.

A look at the build of materials and manufacturing costs concluded that Amazon spends $201.70 on each Kindle Fire, only slightly above its $199 retail price, according to research firm IHS iSuppli. The cost is lower than the nearly $210 estimate the firm initially placed on the device.

Amazon was able to shave off a few dollars by using a few unknown suppliers and employing less memory for the Kindle Fire. The company's strategy of selling the device at a loss--even a slight one--follows the game plan it uses for all of its Kindle products: sell at a cheaper price to spur adoption and make it up through the sale of goods and services on that device.

The Kindle Fire is the first tablet beyond the iPad to generate real consumer interest. The device has largely done so through its $199 price tag, which significantly undercuts many of its competitors. The iPad, for instance, starts at $500. The only other legitimate rival at this price range is the $250 Nook Tablet from Barnes & Noble.

IHS iSuppli said Amazon's use of lesser known supplier Jorjin for the wireless local area network module cost it $4.50, roughly a dollar less than if it had used a more established vendor. The Kindle only ships with 4 gigabits of DRAM, half of what the firm had previously expected, which also lowered the cost by a few dollars.

As previously reported, Texas Instruments was a major contributor to the tablet. The Kindle Fire uses a TI application processor, as well as the power management device and audio codec.

The most expensive component in the Kindle Fire is the display and touch screen, IHS iSuppli said, noting that it cost $87, or nearly half the build of material cost. The display comes from LG Display and E Ink Holdings.

Correction at 7:20 a.m. PT: The article incorrectly labeled Jorjin's contribution to the Kindle Fire. It is a wireless local area network module. The article also incorrectly listed the amount of DRAM. It is 4 gigabits.