October 03, 2011, 4:14 PM — The Kindle Fire tablet costs $209.63 for materials and manufacturing expenses, more than $10 above its $199 pricetag, according to a virtual estimate by IT research firm IHS iSuppli.
Even so, iSuppli said Amazon.com is expected to sell enough digital content with each Fire tablet to generate a marginal profit of $10. iSuppli didn't estimate what Amazon will sell outside of digital content, since physical goods comprise the majority of Amazon's business.
"The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content," iSuppli said in a statement. "Rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon's business."
By physical goods, iSuppli noted that Amazon generates its profits on sales of "shoes, diapers and every other kind of physical product imaginable."
iSuppli said "the importance of this strategy cannot be underestimated," and that "no retailer has managed to create an umbilical link between digital content and a more conventional retail environment. With Kindle [Fire], Amazon has created the most convincing attempt at this yet."
The Kindle Fire is not so much a low-cost tablet as a "super e-book reader," iSuppli said, although it said the device will be successful and potentially will become the No. 2 selling tablet after the iPad, which sells at a starting price of $499.
The Kindle Fire goes on sale Nov. 15 , and iSuppli said it plans to conduct a complete physical teardown of the tablet at that time.
The preliminary cost of the Kindle Fire, plus manufacturing fees, includes $87 for the 7-in. display and touchscreen, the most expensive component. The circuit board costs $70.40 and memory is $25, IHS said.The The Fire's processor is likely a dual-core chipset, which costs $15, iSuppli said.