Amazon Kindle 2: The real cost behind the machine

Amazon Kindle 2: The real cost behind the machine

Summary: Although it's not a huge surprise, according to an article from BusinessWeek today, Amazon's Kindle 2 actually costs a lot less to make then you might think. So, how much does it actually cost to make a Kindle 2?

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Although it's not a huge surprise, according to an article from BusinessWeek today, Amazon's Kindle 2 actually costs a lot less to make then you might think. So, how much does it actually cost to make a Kindle 2? If you're one of the estimated half a million people who have purchased the $359 Kindle 2, you might not want to know that it only cost about $185 to make, according to market research firm iSuppli.

Isuppli provides an estimate of how much profit each company is making off of a particular consumer electronic product by taking it apart and identifying the manufacturer's suppliers, as well as a rough cost of the product's parts.

The most expensive piece inside the the Kindle 2 is the display, which is estimated to cost about $60, or about 41.5 percent of the cost of materials. The screen is unique because unlike cell phones, the display uses battery power only when changing. When iSuppli took apart the Kindle 2, the image that is on the screen stays on the screen, even without battery power. The tiny microcapsules change to black, gray, or white to show text or images.

"The showcase feature of the Kindle is its E-Ink display, which not only is easy on the eyes, but also employs electrophoretic bistable technology that allows it to show an image even when it's not drawing power," Andrew Rassweiler, director and principal analyst of teardown services for iSuppli, said in a press release.

The second most expensive part is the wireless data module from Novatel Wireless that costs $39.50. This allows users to buy books and magazines directly with a wireless data connection. It uses Sprint's wireless data network to download material in under a minute. Rassweiler said the same module have been used in small notebooks for easy wireless connectivity.

Costing only $8.64 is the main applications chip, which is often used in other consumer electronics, such as the Zune.

But, as ZDNet's own Adrian Kingsley-Hughes said the teardown studies rarely take into account the other areas where Amazon put money into, such as marketing, research and development, distribution, warranty, etc.

Needless to say, with the magnitude of Kindle 2s being sold, Amazon is clearly making a profit, but they're definitely not making the full $174 you would think they're making.

Check out Engadget for the full press release.

Topics: Hardware, Amazon, Mobility, Networking, Wi-Fi

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5 comments
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  • i would wager to bet its somewhere in the neighborhood of 50 bucks per unit

    The more sold the better and they have room to discount it later
    Been_Done_Before
  • RE: Amazon Kindle 2: The real cost behind the machine

    x
    Jon Z at Palm
  • RE: Amazon Kindle 2: The real cost behind the machine

    Jennifer:

    Nice breakdown. But you're also forgetting what isn't
    tangible that is a significant cost, the "free" Sprint
    wireless service itself that Amazon pays for and the
    customer has to pay for upfront in the cost of the
    unit and the cost of the books.
    jperlow
    • Just to reiterate

      This is a multi-year subscription to Sprint wireless service. I wonder how long they calculate the average customer will use his Kindle and how much data he will download during this time.
      jorjitop
  • Profit is good

    Good for them if they are able to make a good margin. If a company is innovative enough to get a product out that people like enough to pay a huge margin to get, that company should be congratulated. More companies should try it.
    Angie711