What Comes After The Kindle Fire? The Amazon Smartphone

Amazon just entered the tablet market this week with its Kindle Fire. But this time next year, it could be introducing its own smartphone. A research report put out this morning by Citi analysts Mark Mahaney and Kevin Chang states that an “Amazon smartphone may be coming next year.”

Based on supply-chain checks with hardware manufacturers in China, Citi believes that Amazon is jointly developing the smartphone with Foxconn, but that the phone itself will be manufactured by TMS (which produces the Kindle line).

The chips that will power the phone are at this point believed to be a Texas Instruments OMAP 4 processor and a Qualcomm “dual mode 6-series standalone baseband” (HSPA+ / CDMA EVDO).

Given the estimated hardware costs of $150 to $170, this will turn out to be a mid-end smartphone which could retail for $300 or less. But Amazon is likely to subsidize much of the costs to make it even more competitive just as it did with the $200 Kindle Fire. “What is important to note is that Amazon does not need to make money on hardware,” writes Mahaney and Chang.

Amazon views mobile devices as the front-end for its digital media. It is a delivery mechanism for ongoing subscription services, so it doesn’t care about making money on the hardware. It is betting it will make much more money on digital books, movies, games, and ecommerce over time.