Citigroup: Amazon plotting smartphone to challenge Apple's iPhone in 2012

Posted:
in iPhone edited January 2014
Not content with entering just the tablet market, Amazon is planning to release a smartphone in the fourth quarter of next year, in a move that will challenge Apple and its bread-and-butter iPhone, says one analyst.



Citigroup's Mark Mahaney issued a note to investors saying that, according to the supply chain, the online retailer is planning on releasing a smartphone in time for next year's holiday season, as noted by AllThingsD.



?Based on our supply chain channel checks in Asia led by Kevin Chang, Citi?s Taipei-based hardware research analyst, we believe an Amazon Smartphone will be launched in 4Q12," the note read.



According to the analyst, the device will be jointly developed with Foxconn. Amazon will reportedly pay non-recurring engineering fees to the manufacturer, but the phone and some of its components will be manufactured by the same Hon Hai TMS group that works on Amazon's Kindle e-readers and a rumored 8.9-inch tablet.



Amazon reportedly broke from its usual partnership with Foxconn for the Kindle Fire tablet in a rush to get it out the door. The company is said to have contracted Original Design Manufacturer Quanta because the ODM could save time by piggybacking off of work on RIM's BlackBerry PlayBook.



Mahaney estimates the Amazon smartphone will cost between $150 and $170 to build and may sell for roughly the same amount. ?For a normal brand like HTC, they need to price the product at US$243 to make 30% gross margin. If Amazon is actually willing to lose some money on the device, the price gap could be even bigger,? he said.



The smartphone will likely run Google's Android mobile operating system, as the analyst suggested that Amazon will need to pay an "OS royalty" to Microsoft. The Redmond, Wash., software giant boasted last month that it has achieved patent licenses with half of the Android market. Amazon opted for Android on the Fire, but gave the open source OS a customized look.



The online retailer has adopted a strategy of selling hardware at a loss as a ploy to draw customers to its content offerings. For instance, a teardown of the Kindle Fire revealed that it costs more than its selling price.







In all likelihood, a low margin strategy from Amazon would threaten low-end smartphone makers rather than Apple's iPhone. Backed by the world's largest online store, Amazon may win the race to the bottom on hardware margins because most other hardware makers won't have sales from a robust content ecosystem to fall back on. Downward price pressure in the tablet market from the Kindle Fire has already resulted in a $300 price cut for the BlackBerry PlayBook.



Apple said earlier this month that it's not worried about the Kindle Fire because it believes the tablet will drive customers to the iPad by further fragmenting the tablet market. As such, the iPhone maker may view the prospect of a Kindle phone in the same light.
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Comments

  • Reply 1 of 80
    tylerk36tylerk36 Posts: 1,037member
    Competition is good. Brings out the best. We get to see all the new stuff.
  • Reply 2 of 80
    An Amazon branded phone? I don't quite understand the value proposition on this. What does Amazon bring to the table? Are they afraid that other smartphones don't drive customers to their online store?
  • Reply 3 of 80
    Quote:
    Originally Posted by Suddenly Newton View Post


    An Amazon branded phone? I don't quite understand the value proposition on this. What does Amazon bring to the table? Are they afraid that other smartphones don't drive customers to their online store?



    It's just another delivery channel for Amazon content. My iPhone has replaced my car stereo as my music player of choice, and it's frequently my e-reader at lunch. Plus, consider that part of the appeal of the iPad and iPhone is that Apple is building an ecosystem of iOS devices that all work together, and they drive sales for each other. That's a helluva good place to be, and Amazon is green with envy.
  • Reply 4 of 80
    Go Amazon! I hope Amazon can bring a self-subsidized phone, unlocked without US carriers intervention. That would be a game changer!
  • Reply 5 of 80
    Quote:
    Originally Posted by tylerk36 View Post


    Competition is good. Brings out the best. We get to see all the new stuff.



    This.



    If we do see it, expect to see an Android based device, with the similar Amazon UI on top.



    But the second the dev community starts to play with it, you'll have a very low cost Ice Cream Sandwich device with stock Android.
  • Reply 6 of 80
    Well Amazon is welcome to try this too. I like them as a company so good for them if they can make this work, and good for the consumers if they bring a good product to the market.
  • Reply 7 of 80
    aizmovaizmov Posts: 987member
    Quote:
    Originally Posted by tylerk36 View Post


    Competition is good. Brings out the best. We get to see all the new stuff.



    Not when competing on price, then it is just a downward spiral. Look at the Windows-PC market no innovation of any kind and this is what Android will do eventually.
  • Reply 8 of 80
    Amazon looking to lower the bar again. Apple products might be the only positive thing coming out of this country right now, thank Amazon for watering that down and taking the one place where we excel away... boo... If your gonna compete, your supposed to make your product better not worse! Raise the bar don't lower it! boo...
  • Reply 9 of 80
    apple ][apple ][ Posts: 8,360member
    Yeah, just what the world is sorely missing, another Android phone.



    By the fourth quarter of 2012, there will probably be 617 Android phones VS iPhone, and this Amazon phone will simply make it 618 Android phones VS iPhone. It won't affect Apple or the iPhone much. The people with the most to be concerned about are other Android phone manufacturers, as Amazon will try to claim their tiny piece out of an already crowded, messy and claustrophobic Android pie. It's a race to the bottom for the bottom dwellers.
  • Reply 10 of 80
    Amazon is a good company, but selling a phone? To me, it would be comparable to a Walmart-branded phone. Who would want that?
  • Reply 11 of 80
    More "competition is good" posts. Why are people obsessed with this mantra? Sometimes it is, sometimes it ain't. Do we really need a gazillion android phones? A gazillion sugary cereals? And if the answer is yes, do we need a bunch of parrots chiming in with "competition is good" as they stroll down the store aisles fingering them?



    We'll know if amazon's version of an android phone brings anything to the table when we see it. Since amazon has only one goal, it seems to me: produce loss leader products that drive customers to their store, I doubt it will be anything too exciting.
  • Reply 12 of 80
    There is no need at all for a Amazon phone. This is just a reflection of the greedy ego of Jeff Bozo.



    I am still waiting for my Dunkin Donuts phone.
  • Reply 13 of 80
    Competition is good as was previously stated by another poster, but really, an Amazon Phone is not going to be anything special.



    I can see what the phone will be like now by using the power of my magnificent brain to tell the future!



    Cheap, Android, Rebranded Chinese Unit



    Done, Dusted, Nothing Special. Move along.
  • Reply 14 of 80
    Quote:
    Originally Posted by Aizmov View Post


    Not when competing on price, then it is just a downward spiral. Look at the Windows-PC market no innovation of any kind and this is what Android will do eventually.



    Pretty sure this is what Android has already done. I walk into a mobile phone shop and the only difference between 'droid devices in the same price class I can see is the appearance. The only droid phones I see as "vastly different" (used loosely) are the premium range from Sammy.
  • Reply 15 of 80
    I am still waiting for my Dunkin Donuts phone.[/QUOTE]



    heehee
  • Reply 16 of 80
    Quote:
    Originally Posted by hankx32 View Post


    heehee



    Maybe if I collect enough stickers from the coffee cups in McDonalds I can get a McPhone.
  • Reply 17 of 80
    Quote:
    Originally Posted by cajun View Post


    It's just another delivery channel for Amazon content. My iPhone has replaced my car stereo as my music player of choice, and it's frequently my e-reader at lunch. Plus, consider that part of the appeal of the iPad and iPhone is that Apple is building an ecosystem of iOS devices that all work together, and they drive sales for each other. That's a helluva good place to be, and Amazon is green with envy.



    Well said.
  • Reply 18 of 80
    drdoppiodrdoppio Posts: 1,132member
    Those basterds! Amazon phone will be DOA, just like the Kindle Fire! Apple doesn't care about the bottom-feeders, so it's suing Amazon over a word, and AI posts three articles on Amazon per day because nobody here gives a damn. No one needs convenient access to a huge selection of consumer products, the economy is flourishing anyway. Amazon's phone will be crap like the rest of the Androidz, who wants a Nexus Prime, HTC Rezound or Droid RAZR when they can have the FreeGS? Amazon will not sell any phones at all, and it will sell so many at a loss that it will go bankrupt. Nobody will buy an Amazon phone but it will steal the better part of Android's market share. It will be useless without the Google Apps, and will also fragment Android by offering incompatible Google Apps.



  • Reply 19 of 80
    Quote:
    Originally Posted by cajun View Post


    It's just another delivery channel for Amazon content. My iPhone has replaced my car stereo as my music player of choice, and it's frequently my e-reader at lunch. Plus, consider that part of the appeal of the iPad and iPhone is that Apple is building an ecosystem of iOS devices that all work together, and they drive sales for each other. That's a helluva good place to be, and Amazon is green with envy.



    Very well said indeed.

    Now that I stop and think about it, it really is just Amazon wanting a slice of the Apple Pie (see that I did there?)



    iPad, iPod and iPhone all integrate together with iTunes as the storefront.

    Kindle Fire, Kindle, Kindle Phone(?) all integrate together with Amazon as a store front.
  • Reply 20 of 80
    Quote:
    Originally Posted by DrDoppio View Post


    Those basterds! Amazon phone will be DOA, just like the Kindle Fire! Apple doesn't care about the bottom-feeders, so it's suing Amazon over a word, and AI posts three articles on Amazon per day because nobody here gives a damn. No one needs convenient access to a huge selection of consumer products, the economy is flourishing anyway. Amazon's phone will be crap like the rest of the Androidz, who wants a Nexus Prime, HTC Rezound or Droid RAZR when they can have the FreeGS? Amazon will not sell any phones at all, and it will sell so many at a loss that it will go bankrupt. Nobody will buy an Amazon phone but it will steal the better part of Android's market share. It will be useless without the Google Apps, and will also fragment Android by offering incompatible Google Apps.







    Can't tell if trolling...
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