Guess What: The Kindle Costs More Than It Should!

isuppli-kindle-2-bom-22apr09jpgOh wow! The $359 Kindle actually only costs $189.45 to build. What a surprise! Above is the actually rundown of the pricing. You’re paying Amazon an extra $170. Is that reasonable? COMMENT.

El Segundo, Calif., April. 22, Inc.’s new Kindle 2 eBook carries $185.49 in materials and manufacturing costs, according to a dissection conducted by iSuppli Corp.’s Teardown Analysis Service.
The direct material cost of the Kindle 2, consisting of all parts used to make the product, amounts to $176.83. When adding in the conversion costs-i.e., manufacturing expenses and the battery-the total rises by $8.66 to $185.49.
The total materials and manufacturing costs reported in iSuppli’s teardown analysis of the Kindle 2 reflect only the costs for direct materials, manufacturing and basic tests. Not included in this analysis are costs above and beyond the material manufacturing of the core device itself-i.e., the cost of intellectual property, royalties and licensing fees; those not already included into the per component price-software, software loading and test, shipping, logistics marketing; and other channel costs. These costs are not included because teardowns cannot reveal this type of information.
The combined manufacturing and materials costs represent 51 percent of the Kindle 2’s $359 retail price.
The attached table presents a summary of the major cost drivers for the Kindle 2.

Black ink for E Ink
iSuppli estimates that $60, or 41.5 percent of the materials cost of the Kindle 2, is accounted for by the E Ink Corp. display module, which represents the centerpiece of the product.
“The showcase feature of the Kindle is its E-Ink display, which not only is easy on the eyes, but also employs electrophoretic bistable technology that allows it to show an image even when it’s not drawing power,” said Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli.
“The new version of the E Ink display in the Kindle 2 supports 16-level grayscale images, rather than the 4-level version used in the previous-generation hardware. This makes the Kindle 2’s display look like a printed page.”
Rassweiler noted that the bistable display for the Kindle 2 obtained by iSuppli continues to display the warning message “Critical Battery” even after the product was completely dissembled for the teardown. With no power or electronic control to refresh the image, the display will be frozen in this state forever.

Kindle 2 takes turnkey wireless approach
After the display, the next largest cost driver in the Kindle 2 is the wireless broadband module, provided by Novatel Wireless Inc. Priced at $39.50, the module accounts for 27.3 percent of the materials cost of the Kindle 2. The module supports the CDMA2000 1X EV-DO Rev A air standard.

Thanks to iSupply and Engadget!


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