Amazon to barely profit on Kindle Fire hardware

The big debut of Amazon’s Kindle Fire tablet drew oohs and aahs not only because the device is a huge leap over the company’s previous Kindle e-reader, but thanks to its shockingly low $199 price tag. According to analysts at IHS iSuppli, the company is hedging its bets with the entry price in the hopes that more Kindle Fire owners means more money spent online.

Photo by: Amazon

Adding up the Kindle Fire’s myriad components and manufacturing costs, IHS believes Amazon spends nearly $210 to produce a single unit. This means a profit of just $10 per Kindle Fire sold. The device’s touchscreen display and main PCB account for the bulk of the cost – totaling over $150 combined.

IHS said the company will rely on the sale of physical products via its online store to compensate for the negligible hardware revenue. The plan has already proven successful. Last year, Amazon earned $34 billion through its online retail services – a figure it could very well shatter by the end of 2011.

The analysis group said the tablet will grab the enviable number two market spot following Apple’s successful iPad. Shareholders seemed to hold similar faith; Amazon stock surged 5 percent following the unveiling last Wednesday.

The Kindle Fire will be available on November 15th. (via IHS iSuppli)