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Little profit margin for Amazon on Kindle Fire HD

Amazon isn't making much money from its 7in Kindle Fire HD, a new teardown reveals. IHS iSuppli found that the device, which retails for £159 (16GB), costs about £110 to produce.

The total bill of materials (BOM) for the small Kindle Fire HD is just over £100, IHS found. Adding in an extra £10 for manufacturing costs brings its total to £110.

The priciest Kindle Fire HD component is the £40 touch screen and 7in, 1,280 x 800 display from LG and possibly Panasonic. Coming in at No. 2 is the £15 memory.

Mechanical components are £13, followed by the TI OMAP processor for £10, and the £10 battery. The Fire HD got a chip boost from the 1-GHz processor in the (US-only original) Fire to a 1.5-GHz chip in the HD, but that only increased the price by around £1.25

The addition of a camera, meanwhile, cost just £1.50 because of its low, 1-megapixel resolution. For comparison, the 5-megapixel rear-facing camera and 1-megapixel front-facing one on the iPad mini cost £7, IHS said.

"Amazon's strategy with the Kindle Fire HD 7-inch tablet is not really to make money on the hardware itself," said Andrew Rassweiler, senior principal analyst of teardown services for IHS. "Rather, the idea is to create a product at a compelling price point and then get a lot of consumer traction in order to put Amazon content and the Amazon online store into consumers' hands. However, for its second-generation Kindle Fire, Amazon has reduced the cost to make the tablet, cutting the cost of the hardware subsidy that the company must put out to pursue its strategy."

(Study conducted in US and costs converted from US dollars)