Apparently, the folks at iSuppli subscribe to the socialist notion that the men of ideas are of no importance. Obviously, if you just take all the parts and throw them in a box, they'll magically form a Kindle.

This reminds me of a story from a WSJ article from 1974, about the nationalization of plants in Chile, quote in Ayn Rand's Philosophy: Who Needs It:

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Among them was Dow Chemical Company, which owned a plastics plant in Chile. Bob G. Caldwell, Dow's director of operations for South America, came with a technical team to inspect the remains of their plant. "'What we found was unbelievable to us,' he recalls, 'The plant was still operable, but in another six months we wouldn't have had a plant at all. They never checked anything.' ....Worse yet, the highly inflammable chemicals handled at the plant were in imminent danger of blowing up. 'Safety went to pot,' Mr. Caldwell says. 'The fire-sprinkler system was disconnected and the valves taken away for some other use outside. Then they were smoking in the most dangerous areas. They told us, "You didn't have any fires while you were here before, so it must not be as dangerous as you said."'"
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Sounds pretty typical. From what I've see of product pricing, its cost roughly doubles for each set of hands it passes thru. What iSuppli hasn't taken into consideration is the overhead costs of simply doing business. Such costs includes salaries, benefits, accounting, insurance, sales, etc.

I see nothing here but facts, the assertion that this site subscribes to socialist notions is laughable. facts are neither conservative or liberal. Believe it or not there are some who are curious about the internals of the Kindle 2 out of technical curiosity without any ideological motivation.

Does this mean that those who disassembled the original xbox to find that Microsoft was taking a loss on every sell were spouting capitalist propaganda?

I don't get the point here? Someone has to pay for all the R&D that went into it's development. I wouldn't imagine if I were the engineers on this thing I'd want to suck down the millions it took to develop. There was a back story to the developers of the E-ink system used by Kindle and the years and money it took to develop. I wish I could find the link, but pretty cool story behind these guys.

So yes, price is high, and production costs are low. People are buying it, more and more e-books are available on Amazon, and it's not stopped the marketing buzz behind it. It's the law of supply and demand. Because people can't afford it they want it, those can flaunt it, and that just makes the rest of us drooling masses want it more. As long as they have a patent on the technology you'll just have to suck it up and pay since it's a relatively new technology and quit blubbering about the 'true costs.' Just so no insult is implied on those who want one, i myself do, and i love the fact that it has free 3G access anywhere at no extra cost. Factor that into your account when was the last time you paid $300 fixed for unlimited internet access on your phone and were able to read books from it for days without recharging? I thought not.

It's not rocket science guys... of course there were design and software costs associated with the device, but those are sunk costs. This company didn't take this apart to allege that Amazon is screwing you, it's useful to competitors and investors to know what these things cost to make, so we know how vulnerable they are to a cheaper rival emerging and how much flexibility they have with future price drops.

You people are retards. Over 50% COGS is _high_. Most CE products break down to about 1/3 COGS, 1/3 channel margin, and 1/3 opex+r&d+profit.

In this case Amazon _is_ the channel so they can afford a little thinner margin. But most importantly, they are the book provider and that's where the gravy is.

Brian - simmer the hell down. This article is a purely objective commentary on the product's cost to manufacture. Where on earth do you get the idea that they're saying it's overpriced?

You people are retards. Over 50% COGS is _high_. Most CE products break down to about 1/3 COGS, 1/3 channel margin, and 1/3 opex+r&d+profit.

In this case Amazon _is_ the channel so they can afford a little thinner margin. But most importantly, they are the book provider and that's where the gravy is.

Brian - simmer the hell down. This article is a purely objective commentary on the product's cost to manufacture. Where on earth do you get the idea that they're saying it's overpriced?

Like the XBox, expect the Kindle-2 price to drop fast as we approach a new school term and Christmas. At this point Amazon is trying to get their supply chain ironed out (what they failed to do last time); higher prices help.

Next year some north western college is going to require all incoming freshmen to have Kindle-2s for english, accounting and biology classes. Not a bad idea actually (i.e. I hereby copyright it! Send your e-tax to me!). They'll need a encrypted USB dongle to make data available from/to student PCs (screwing Linux and Apple again, despite the device being a FreeBSD or Linux based solution).

The cost is so low that before Christmas the Kindle-2 will be marketed at $99 with your first 3 e-books (NY Times best seller list only please) and a gift copy of 'Gone with the Wind' (poetic license).

Then Kindle-3 will be on the market alongside the Android base 'Alexia' (short for 'Library of Alexandria'). Google, with their public domain book library and marketing skill will be the next great (and probably last) publishing house on Earth. They might even add an encrypted Android/Linux dongle solution. Maybe.

Steven

So you think the ipod touch / iphone have a 50% markup?
More like a few hundred percent!

Sheesh, next they'll tell me it costs a lot, lot less to make a can of Coke than to buy one!

Who would have known...?

Brian, Please put down the WSJ and Fox News channel for a moment and use some rational if you can muster some up. You are leaving us all out there in left field with the other "extremists". Try to tame that paranoia. This article is only stating the cost of MANUFACTURE. Did you read it? Just the parts cost. That is it. It did not delve into R&D and logistics behind the device just parts cost. Read the article again please.

Wow you people are to much.. Read a business book or something. You comment like you know what your talking about but your a complete joke to those who do.

Ever hear of speculation? You know when you use facts such as component prices to understand emerging trends. Hey! I wonder if you could use the information from iSuppli to speculate on future pricing as well as potential changes in the market as other competitors release competing products? Maybe there are businesses out there who might find this information helpful.. Maybe it will spur more competition and expand the market.. Nah that's not possible, this can't possibly be useful to capitalist business people, this must be socialists trying to destroy "free" markets.

Speaking of.... Brian are you seriously calling people socialists and quoting a article from 70's?? Why not just shake you cane in the air and yell at them to get off your lawn.. BTW the cold war is over and we won.. oh ya it didn't matter.

I normally wouldn't comment but I just felt compelled to voice my disdain for you... And guess what.. just like your useless opinions.. WHO CARES???!

Y'all for got about the *free cellular service* they provide with every Kindle. The markup lets them sell it to you without charging you a monthly fee to get online. Let's say they sold it to you at cost, but charged you $20 a month for internet access. You'd end up paying way more in the long run.

$185.49 (Kindle at cost) + $240 (one year of $20/month internet service) = $425.49 (+$240 every following year)

The Kindle costs $359. You do the math.

Good lord, what the frakk are you nitwits on about?

iSuppli's ENTIRE mandate is to dissect and catalog the COMPONENT PARTS VALUE of a completed product; nowhere in their breakdown do they assess development cost, or it's value as a product, or the "worthiness" of that relative value intrinsic in its parts against the purchase cost of the product.

They get paid by people who buy their breakdowns for business purposes; whether it be to figure a way to make the product less expensively, or to get an idea how much it might cost to manufacture a similar product, or just for plain press-related intent.

In truth, I'm surprised to see that it costs that much on a parts-only basis; typically tech products range in the 5%-25% range of cost to price ratio depending on the product's intended market; spending half the sale price on manufacturing such a product generally indicates you're getting a LOT of technology for your dollar.

Of course in this case much of that tech revolves around making it easy for you to spend a lot MORE money on books that have a fixed one-time production cost; but hey - that's Amazon's business model. I simply cannot make myself pay HARDCOVER price for an e-Version of a book that has been released on paperback for over a year; there's a reason they still have competition.

Don't be surprised when the geeks start hacking them; I'm sure someone is already eyeing that all day battery life and built-in Wireless Connection on someone else's account with interest...

mnem

I think this piece is just a curiosity piece. Who cares how much profit Amazon makes on each Kindle. If they can pull in a healthy profit, good for them. I think the price is fair for the device, although it is still a bit higher than most people are really willing to pay, which is why they haven't become wildly popular yet, like the iPod, but it is still a fair price. Everyone needs to stop whining about the profit that a business makes and realize that a fat profit is what makes them stay in business when others fail!

Okay Brian, go back on your meds. They just tore it apart and estimated the price of the components. They didn't make an evaluation of whether or not it was fairly price. They could easily be selling it at a loss and hoping to sell more e-books. They didn't know how much R&D cost, providing the wireless service, manufacturing, internal shipping and logistics, maintaining their entire kindle e-book line etc.

Why is it any time someone reports some hard facts conservatives start freaking out and calling everyone a socialists. Interested in how much the parts cost? Read the article. Not interested? Then don't. It's not a socialist plot. You are crazy.

Isn't the ratio of build cost to sales cost for the device irrelevant? It's a razor. It's the on-going sale of blades (that, is e-books) that is the profit maker.

It is interesting to know the material costs, but anyone in manufacturing knows that the cost of a product is not the sum of its part costs.

Aside from 1 time engineering and design costs, there are manufacturing & tooling costs. There are shipping costs. There are import levies. There are packaging costs. Then there is a share of the sale the goes to the store. There is infrastructure cost for the wireless delivery. There is costs associated with translation and hosting of content for the device.

The more interesting figure is the profit margin for the manufacturer, which is generally

I just had a question about the kindle 1 device. My mother was recently given a kindle 1 and the person whom had it before her painted it with nail polish i was wondering were I could find parts. If you have any useful information can you please post it on my website or I will check this website.

OK, first off, all of you are retards. All of you. I don't care what your opinion is, or if you think material costs should be 1/3 or 1/2 or why this is just like Chile's nationalization of their chemical plants or WHATEVER THE FUCK, I just don't care. Here's how it is. Goddamn ebook reader gets made, bunch of twats working for iSuppli take one apart, google chip prices, pull numbers out of their asses, and Gearlog posts a link- just a single goddamn link - and it starts a big fucking flame war. They start getting all these unique views as you call your jackass friends from the Walgreens bathroom, and then they make more money from their advertisers. People are literally profiting from your stupidity. So stop foaming at the mouth, finish taking the dump or whatever you're doing in the Walgreens bathroom anyway, and LEAVE. Holy hell, I feel like I'm in the middle of some fucking chess-club retard fight where they're all arguing over whether Lando from Star Wars or Legolas from Lord of the Rings is hotter. Retards!