April 22nd, 2009
Amazon Kindle 2: The real cost behind the machine
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.
Jennifer R. Bergen is a journalist and blogger living in New York City. See her full profile and disclosure of her industry affiliations.
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| 04/22/09
