Amazon ‘to build smartphone’
Amazon is developing a smartphone to bolster its hardware challenge to Android manufacturers and Apple, according to Citigroup analysts.
The financial firm based its claim on discussions with electronics manufacturers based in Taiwan. It said that Foxconn, the Chinese manufacturer that makes the iPhone for Apple, was working with Amazon on the device.
“Based on our supply chain check, we believe FIH [Foxconn] is now jointly developing the phone with Amazon,” Citigroup said in a research note.
Foxconn is reportedly engineering the smartphone for a one-off fee. It will then be manufactured by Hon Hai, which makes the Kindle and Kindle Fire for Amazon.
“However, we believe that Amazon will pay NRE (non-recurring engineering fees) to FIH but the device and multiple components will actually be manufactured by Hon Hai’s TMS business group (the same business group that makes Amazon’s e-reader and the 8.9” Amazon tablet),” Citigroup said.
The move would open up a new front in Amazon’s assault on the hardware business. It recently introduced the Kindle Fire tablet in the United States, which is already seen by many observers as the most credible challenger to the iPad to date. It runs an adapted version of Google’s Android mobile operating system, and Amazon has also developed its own vetting process for apps.
Citigroup speculated that Amazon could sell its smartphone, reckoned to cost between $150 and $170 to build, at a loss as it does with the Kindle Fire.
“For a normal brand like HTC, they need to price the product at $243 to make 30 per cent gross margin,” the research note said.
“If Amazon is actually willing to lose some money on the device, the price gap could be even bigger.”
The unnamed Amazon smartphone will use a Texas Instruments OMAP 4 processor, Citigroup said, based on the dual-core A9 architecture designed by the British firm ARM. The latest iteration of the processor is now emerging in the Samsung Galaxy Nexus.
More powerful versions will be available by the time Amazon launches its smartphone, which Citigroup said will be in the fourth quarter of 2012.