Teardown pegs Kindle Fire cost at a loss-making $201.70

Amazon is selling its Kindle Fire tablet at a slight loss in hopes of boosting its online media stores, according to a recent report from analyst firm IHS iSuppli.

The manufacturing and supply chain research group said in its latest teardown report that the Amazon tablet carries a total cost of $201.70 in materials and labour, slightly higher than its $199 price tag.

"The Kindle Fire, at a retail price point of $199, is sold at a loss by Amazon, just as the basic Kindle is also sold at a loss at the current $79 retail price point," said IHS senior director for teardown services Andrew Rassweiler.

"Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle."

According to the teardown report, the most expensive component on the Kindle Fire is the LG touchscreen, which costs an estimated $87 per unit. The device's memory is estimated at $22.10, while the battery is believed to cost $16.50.

Other costs include $14.65 for the tablet's processor and $14.40 for the Kindle Fire's enclosure hardware.

The IHS report comes as Amazon is believed to be developing a smartphone handset for release in late 2012. Like the Kindle Fire, analysts believe the company will sell the smartphone at a loss and look to make money through the sale of music, software and e-books.

Rassweiler noted that the Amazon business plan is in line with that of many mobile carriers.

"They sell you a phone that costs them $400 to $600 or more to make for a price of only $200," the analyst explained.

"However, they expect to more than make up for that loss with a two-year service contract."