What are Amazon's Margins on the Kindle?

[markbot]

The actual hardware of the Kindle is not going to be more expensive than that of the Sony Reader 505. It's even made of cheaper materials.

Assuming that retailers get at least a 20% gross margin and so does Sony (Sony had gross margins of 22% in the last year)....this means the cost of the 505 to actually produce and ship to the store is aprox $192. And I would actually have to say that this is a high estimate. This doesn't include admin costs, etc.

So let's say the Kindle costs $192 to manufacture and ship to the customer.

This leaves the considerable cost of the EVDO. Assuming that the product cycle is 3 years....probably shorter....then the maximum cost of the EVDO per month would be $5.75....if u want to break even on the device. Although this doesn't factor in revenue sharing from downloads....and I'm sure Sprint does get revenue sharing.

Let's say the cost of the EVDO is $4 per month....flat per device (but with revenue sharing on downloads of course). This means gross margins are 16% for amazon. So they make aprox $63 per Kindle sold. This doesn't include admin costs.

Then of course they are making money on the book downloads. losing money on new books...making heeps of money on older books.

Overall, I think the business model works. This is a viable business. Amazon will stick around for a long time!!!

[SanAntone]

Lots of conjecture here...but how could it be anything else?

The only component price I've read about for sure is the screen and the cost---to manufacture--is $200.

I'm with you in hoping that Amazon is making a profit off of the Kindle and the books...that way they'll stay around and support the Kindle for a long time.

[RWood]

Since EVDO is directly related to book buys (assuming that Amazon will charge for general web surfing, etc.) then it seems likely that the EVDO cost is (or will) be factored into the book price. If the assumption you stated that there is a $4 per month for EVDO, then this is most likely for the Wikipedia type of surfing.

[datrop]

Don't forget the Kindle's wireless hardware. The FCC pics show an Anydata DTEVDUAL module, which is based off of a Qualcomm MSM6500 chipset. An iSuppli teardown of the Motorola Q from 2006 gives an estimate of $14 for the MSM6500 chipset, so that could be a conservative ballpark figure for the module cost, assuming price decreases on the chipset due to manufacturing improvements over the year.

Wow. An e-ink screen has an estimated cost of $200? Wow.

http://mykindle.com/files/kindle_fcc.pdf
http://www.anydata.com/modems.php
http://www.isuppli.com/marketwatch/default.asp?id=351

[NatCh]

Originally Posted by datrop

Wow. An e-ink screen has an estimated cost of $200? Wow.

I think that's closer to accurate for the 8" display, the 6" inch is somewhere between $150 and $200, as a best guess.

It's a new tech, and there're only two licensed manufactureres (and iRex uses all they make on their own devices), so there's simply no economy of scale in play yet.

[tribble]

Actually, there is only one manufacturer. And thats PVI. iLiads screens are manufacured there aswell. Fir competition will be PlasticLogic, who are building a production plant in Dresden, Germany as we speak.

[NatCh]

You've mentioned that before, tribble, and I'm not trying to argue, only make sure I've got it straight: I thought I remembered that iRex/Philips was making their own panels -- have they never done so, and I'm just misremembering?

[HarryT]

Originally Posted by NatCh

You've mentioned that before, tribble, and I'm not trying to argue, only make sure I've got it straight: I thought I remembered that iRex/Philips was making their own panels -- have they never done so, and I'm just misremembering?

My understanding is that they use PVI screens, but their own controller. That's why the iLiad is (currently) unique in its ability to display 16 grey-scales.

[NatCh]

Trouble is, what I'm trying to remember is from almost 2 years ago, and there has been ... rather a lot of information that has come through in the meantime.

[wallcraft]

Originally Posted by NatCh

I thought I remembered that iRex/Philips was making their own panels -- have they never done so, and I'm just misremembering?

My impression is that iRex did not say much about where the screen came from until recently. But now we have iRex's i to i blog entry: what makes our electronic paper displays different.

[NatCh]

Thank you, wallcraft! I think this clears it up nicely:

The manufacturer of the EPD for the different e-readers, including the iLiad is Prive View International. In case of iLiad, the TFT array is a proprietary design.

So, iRex is the only company using their particular type of e-ink, but PVI is still making it.

Thank you again for setting me straight!

[schulzmc]

I measured, and it's about 3/8ths of an inch on each side. (grin)