Amazon Kindle Fire Costs $209.64 to Build

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Amazon has just unveiled its latest Kindle Fire tablet, promising easy access to Amazon content at a competitive price. Analysts have mentioned estimates ranging up to $50, but a reputable component analyst says it’s just about $10 each.

Amazon will be shipping the Kindle Fire next month, and it envisions the tablet to be a consumer-oriented device for accessing Amazon content. Priced at $199, it won’t break the bank, and should be an ideal gift for oneself or loved ones this holiday season. But every time you shell out $199 for the Kindle Fire, Amazon actually loses about $10.

At least this is how IHS iSuppli estimates it. (iSuppli is the same company that does product teardowns to determine the components that make up a product, and estimate the cost.) According to iSuppli analysts, each Amazon Kindle Fire is esimated to cost around $209.63. This is broken down into $191.65 in component costs, and an extra $17.98 in production costs.

Earlier estimates by analysts from Piper Jaffray pegged Amazon’s loss at about $50 per unit. iSuppli’s estimate seems to be more realistic, given the analysts’ track record with making such asessments. iSuppli further estimates that if the sales of digital content and merchandise were to be considered, Amazon is likely to earn a  marginal profit of $10 for each Kindle Fire that it sells.

The NPD Group says Amazon is not likely to get a big increase in sales of digital music and video, even when the Kindle Fire starts shipping. Analysts are cautious on how long it will take “consumers to get on board with the total tablet entertainment experience.” However, games and small apps like Angry Birds will be where tablets get Amazon the best chance to earn.

Still, this is just what Amazon is banking on. They may be losing money on each Kindle Fire sold, but they plan to more than make up for it through content sales. They may not be able to compete against Apple in terms of margins per tablet sold (the iPad reportedly earns Apple a 30% margin, something that Apple enjoys due to aggressive supply chain control). But with the popularity of Android apps, does Amazon have a winner? Or do they plan to focus on volume for now, just to get traction and market share, and worry about earnings later?