Report: Kindle 2 costs $185.49 to build

If you've been curious to know what it costs to make the Kindle 2, iSuppli has dismantled Amazon's digital reader, taken stock of all its components, and come up with an estimated price tag of $185.49--or roughly half the Kindle 2's retail price of $360.

That figure doesn't include the fee Amazon pays Sprint for the Kindle 2's built-in "free" wireless service or any marketing costs, which can be substantial. So the true "actual" cost is probably significantly higher, though Amazon obviously preserves some of its margin by selling direct to consumers.

If I had to guess, I'd say Amazon was making more like $100 on each unit, give or take $10. That's still quite decent, and when you factor in the high margins on Amazon's $30 optional Kindle 2 cover, things look even better.

So, yes, there's probably a little room for a discount. But if you're looking for a Kindle 2 price cut anytime soon, I wouldn't count on it. If anything, the first Kindle 2 deal you'll probably see is Amazon bundling in a cover as a freebie.

Comments?

(Source: iSuppli via Engadget)

[russkeller]

I was always under the impression that the ballpark industry standard for selling products is around double the cost of parts. Sounds like Amazon is on par to me, it'd be nice if they could find the parts cheaper I guess. Or just get the freakin industry to substidize it.

Hell, Signup with the newspapers for sell ad space on the kindle. Get ad revenue involved and they'll be tossing kindles around for free.

[russkeller]

I was always under the impression that the ballpark industry standard for selling products is around double the cost of parts. Sounds like Amazon is on par to me, it'd be nice if they could find the parts cheaper I guess. Or just get the freakin industry to substidize it.

Hell, Signup with the newspapers to sell ad space on the kindle. Get ad revenue involved and they'll be tossing kindles around for free.

[darren_kopp]

i think a fair amount of the cost is also the e-ink technology. can't remember the other company that developed it, but i think amazon invested quite a bit into it. devices are always more than just the "parts that it's put together with."

[BlutoNYC]

What is not being taken into account are the other costs that are required to deliver the product to you. rent, electricity, wages, building rent, etc. so the room for a discount is not a much as one may think. Component costs will need to come down in order to see a dent in pricing. One way this can happen in the long term is if the Kindle 2 goes viral then I'm sure Amazon can leverage better volume pricing.

[celticbrewer]

Exactly. To continue the list... taxes, employee healthcare, R&D, focus groups, advertising, product support, training (for employees and customers), lawyers & patent/c-right fees, etc... The list goes on and on. Doesn't sound like such a bad price afterall, huh?

[scifidaddyo]

You forget that Amazon sells other things besides the Kindle 2. so, they are already paying employees. They are already paying rent. R&D costs weren't 100% funded by Amazon. and you don't 'OWN' the e-books. To cut costs, i suggest having a flat fee per downloaded book via wireless. That way, Amazon wouldn't have to pay sprint a fee for each Kindle 2. I'd be happy to buy a Kindle 2 for $200.00, download e-books onto my home computer and then upload to the Kindle 2. If i really needed something to read, i'd pay a bit extra ($3.00??) per wireless book download (in addiiton to the e-book cost).

[checodaman]

And Jordans cost $2.03 to make but cost $250.

[faceless128]

indeed.

you gotta pay for all those commercials... and pay jordan and all the other athletes under the jordan brand..

[Hellcat]

The display is what costs the most, as more companies start to make that type of display (or a better one comes out), it'll get cheaper. I'd think they could get the broadband module cheaper though.

[tcr071]

I hardly think more companies will be invested money into R&D for e-ink black and grey displays. It is an eventual dead end.

[rosswald666]

What has not been taken in account is that Amazon is buying all the parts at wholesale prices, which tend to be an order of magnitude lower if you purchase in 100's of thousands pieces. So their profit margin is not measly $100, but more likely $200, plus they lock you into their subscription. That explains why there exist some other ebook readers (foxit comes to mind) which are more than $100 cheaper (AND they still make a profit, and do not have such a strong backing as does Amazon with it's bookstore and tradition).
They may have broken a new ground in the market, I give them that, but they surely ain't losing their precious dollars.
In other words, $360 for kindle plus vendor lock-in equals rip-off. I hope that the competition will drive the prices down eventually (like it IS happening now in the smartphone industry, but it took way too long)

[flatrock19]

Those are the parts costs, but they also have to earn back their development costs.

However, this is also a product with a product designed to sell their ebooks, which they don't sell cheap, and it appears to me the costs of delivering the ebooks over Sprint's network is included in the price of those books.

Since this product is designed to sell their specific format of ebook, I would have expected them to take an approach more similar to the gaming market where the hardware is sold with little markup in order to get more readers out there, and then the profits are made selling the content.

Amazon on the other hand doesn't seem to really want to push ebooks that hard. They seem to see it as a market they must be involved in and maybe even take a lead in, but they don't seem to want it to cut too far into their traditional book market.

Maybe they are seeing the problems the music and movie industries are having with digital media and want to stick with selling physical media as long as possible since it's a market they understand well.

[amd0505]

I always love the famous "other cost" line. I wonder $32.11 goes to??? In all, Amazon is just doubling the cost of parts which is understanding.

[viper396]

Oh no, a company is trying to profit from a product they sell! The horror of it all...

[lstockett]

Well, they didn't profit from the Kindle they sold me. I sent it back because the text was a washed-out light gray instead of black. I sent the replacement back too for the same reason. The costs above don't include all the extra expenses that come from replacing defective units. You'd think they'd make more of an effort to address issues like that. It would save them money and give them fewer angry customers.

[hameiri]

Well, we still live in America, even though the government has screwed up the banking and US automobile industries.

See, here in America, you don't HAVE to buy anything (well insurance we do). If you think the Kindle isn't worth it to you, don't buy it!

If a company doesn't make a profit, they go out of business (usually). Then they can't provide you with products. Profit is good. It allows us to get products and services, and allows people to work... without any direct taxpayer money. Wild, huh? In fact, the business actually PAYS taxes. What a concept!

I think the Kindle is worth the price because the product is good, and it GIVES you a wireless internet connection almost anywhere, anytime. What other product does that? I'm very happy they can somehow make a profit with that kind of business plan.

Thanks Amazon.