Kindle Blog has done an estimate of the parts in the new K4. I'll let you read the link for details.
But the blog is conservative. I see, of the $113 cost:
Amazon should be getting a 40% to 60% discount on the screens. Let's round that to a savings of $18 less than estimated.
$13 for a CPU is a *much* higher end CPU in volume than an ARM A8. For $13, Amazon should be getting a 1.0 to 1.2 Ghz A9. A further $5 in savings (or so) in high volume.
Many of the other chips are overpriced by a bit here and there. Recall, Amazon is buying in multi-million unit quantities. They do not pay list nor fleet price. The vendors negotiate far lower pricing. I estimate another $8 in savings.
Or $113 - $18 - $5 -$8 = $82
For something that sells for $109 (sans special offers), I suspect Amazon is making a small profit out the door.
Oh, e-ink pricing will drop. Now that there is the 'Kindle Fire,' e-ink knows they must be competitive or Amazon will make the tablet cheap enough to start displacing e-ink sales.
Neil
Thursday, October 13, 2011
Sunday, October 2, 2011
Bad Kindle Fire Cost Estimates
I have a small number of friends who are executives who negotiate for big contracts. They've always been able to beat analyst expectations when negotiating in high volumes.
I'e seen some ridiculous cost estimates of the Kindle fire that use the cost when buying chips and other parts in thousand unit quantities. At those quantities, one calls a clerk and has a fixed price. For the Kindle fire, it is an estimated 4 million units in 2011. I'm sure for large minimum order quantities and a six+ month production run, Amazon is paying less. Far less.
The trick is:
1. Buy vendors (e.g., Amazon bought their touchscreen chip vendor, Apple with their CPUs)
2. Bid three or more vendors against each other (Amazon did this with LCDs and CPUs bidding Qualcomm, Nvidia, and the winner TI against each other for a huge order).
3. Do not rush the bidding (no evidence of this on Amazon's part). The vendors need to go to their sub-vendors to find unit price reductions for volume guarantees. For example, in chip testing.
4. Listen to vendor suggestions for alternate design ideas. I'm certain Quandra removed cost from the blackberry playbook and was willing to 'give' the design to Amazon in return for volume guarantees. I doubt this was Amazon's going in position.
Analysis where the Kindle fire costs a little more that $199 to build.
More believable $150 BOM for Kindle fire.
The above analysis breaks down the costs . My only real complaint is Amazon wouldn't pay $19 per processor (CPU). Rumors are Amazon is paying TI far closer to $10. That alone would make the Kindle Fire a profit maker. I've also heard Amazon negotiated at just the right time for the screens and is paying less for them. True or not, Amazon is the first Apple competitor to be able to jump in and guarantee multi-million unit volumes. Amazon probably paid upfront the setup costs, so the more they sell, the more profit. :)
The above doesn't include all the costs of building/selling a Kindle fire. It is probably $30 to $40 short of the full cost. So do not think Amazon is making $49 profit per Kindle Fire. It is probably in the $1 to $10 range in 2011 (better in 2012 as post holidays chip and other costs drop).
My best estimate is the Kindle Fire goes out the door at a tiny profit. I just cannot believe the high component costs quoted for Amazon when they are bidding on multi-million unit quantities. It isn't that Amazon isn't spending and losing money somewhere (e.g., India fullfilment centers). I just do not see the huge 'loss leaders' for the new Kindles some articles are claiming. Not in the volumes Amazon in buying in.
Lightsaber
I'e seen some ridiculous cost estimates of the Kindle fire that use the cost when buying chips and other parts in thousand unit quantities. At those quantities, one calls a clerk and has a fixed price. For the Kindle fire, it is an estimated 4 million units in 2011. I'm sure for large minimum order quantities and a six+ month production run, Amazon is paying less. Far less.
The trick is:
1. Buy vendors (e.g., Amazon bought their touchscreen chip vendor, Apple with their CPUs)
2. Bid three or more vendors against each other (Amazon did this with LCDs and CPUs bidding Qualcomm, Nvidia, and the winner TI against each other for a huge order).
3. Do not rush the bidding (no evidence of this on Amazon's part). The vendors need to go to their sub-vendors to find unit price reductions for volume guarantees. For example, in chip testing.
4. Listen to vendor suggestions for alternate design ideas. I'm certain Quandra removed cost from the blackberry playbook and was willing to 'give' the design to Amazon in return for volume guarantees. I doubt this was Amazon's going in position.
Analysis where the Kindle fire costs a little more that $199 to build.
More believable $150 BOM for Kindle fire.
The above analysis breaks down the costs . My only real complaint is Amazon wouldn't pay $19 per processor (CPU). Rumors are Amazon is paying TI far closer to $10. That alone would make the Kindle Fire a profit maker. I've also heard Amazon negotiated at just the right time for the screens and is paying less for them. True or not, Amazon is the first Apple competitor to be able to jump in and guarantee multi-million unit volumes. Amazon probably paid upfront the setup costs, so the more they sell, the more profit. :)
The above doesn't include all the costs of building/selling a Kindle fire. It is probably $30 to $40 short of the full cost. So do not think Amazon is making $49 profit per Kindle Fire. It is probably in the $1 to $10 range in 2011 (better in 2012 as post holidays chip and other costs drop).
My best estimate is the Kindle Fire goes out the door at a tiny profit. I just cannot believe the high component costs quoted for Amazon when they are bidding on multi-million unit quantities. It isn't that Amazon isn't spending and losing money somewhere (e.g., India fullfilment centers). I just do not see the huge 'loss leaders' for the new Kindles some articles are claiming. Not in the volumes Amazon in buying in.
Lightsaber
Saturday, October 1, 2011
2.7 Kindles 2Q2011, Estimated over 25 million in 2011
Amazon sold about 2.7m of its Kindle e-readers in the second quarter as it took 51.7% of the e-reader market, IDC says. The second-larger share was taken by Barnes & Noble's reader, with 21.2%, in a market totalling 5.4m units in total for the quarter.
Source Gaurdian
Now let's talk other ereader numbers:
Digitimes has more information
6.9 million Kindles in 2010
Total 6.0 million Kindles in the 1st half of 2011 (not surprising, ereaders sell better in the 1st quarter than the 2nd quarter).
Expecting sales of 15 million 'new Kindles' and 'Kindle touch' (in 2011)
Plus some undisclosed number of K3s/'Kindle Keyboard' in the 2nd half of 2011.
And 4 million 'Kindle Fire'
Or: 25+ million Kindles in 2011 versus 6.9 million in 2010.
Look at that seasonality... 19 million in the 4th quarter versus 6 million in the first half of the year. Plus a few million more K3s sold in the 3rd quarter. :)
Amazon has laid down their cards. The competition must react.
Late edit:
IDC raised the ereader estimate from a mere 16.2 million units to 27 million. They're also going to count the 'Kindle Fire' as ereaders and not tablets. If they're doing that, I expect ereader sales to easily beat their expectations. Then again, they only expected ereaders under $100, not all the way down at $79. (I still am amazed how aggressive Amazon is being.)
If my previous post's prediction of new Kindles selling half as many books per Kindle as older Kindles holds true, we'll still see an explosion in ebook sales. I'm very much looking forward to seeing what indie author sales do after November 16th (new Kindle shipping date).
Got Popcorn,
Neil
Source Gaurdian
Now let's talk other ereader numbers:
Digitimes has more information
6.9 million Kindles in 2010
Total 6.0 million Kindles in the 1st half of 2011 (not surprising, ereaders sell better in the 1st quarter than the 2nd quarter).
Expecting sales of 15 million 'new Kindles' and 'Kindle touch' (in 2011)
Plus some undisclosed number of K3s/'Kindle Keyboard' in the 2nd half of 2011.
And 4 million 'Kindle Fire'
Or: 25+ million Kindles in 2011 versus 6.9 million in 2010.
Look at that seasonality... 19 million in the 4th quarter versus 6 million in the first half of the year. Plus a few million more K3s sold in the 3rd quarter. :)
Amazon has laid down their cards. The competition must react.
Late edit:
IDC raised the ereader estimate from a mere 16.2 million units to 27 million. They're also going to count the 'Kindle Fire' as ereaders and not tablets. If they're doing that, I expect ereader sales to easily beat their expectations. Then again, they only expected ereaders under $100, not all the way down at $79. (I still am amazed how aggressive Amazon is being.)
If my previous post's prediction of new Kindles selling half as many books per Kindle as older Kindles holds true, we'll still see an explosion in ebook sales. I'm very much looking forward to seeing what indie author sales do after November 16th (new Kindle shipping date).
Got Popcorn,
Neil
Thursday, September 29, 2011
Prediction: Fewer ebooks per Kindle for lower cost Kindles
$99 ereaders are here and they will push ereaders into new markets. Unfortunately, many of those new Kindles sold will not sell as many books per Kindle.
Why? Many of the early adopters of the Kindle read over a hundred books per year.
I know of one individual who is buying 'extra Kindles' to avoid the inconvenience of forgetting to pack a Kindle for travel or even walk across the house! That will increase the reading a little (in particular not forgetting the Kindle on a six-week trip...), but only incrementally.
I know of several families who either made their kids share a Kindle or wouldn't risk giving a $139 device to that young of a child who will be buying a new lower cost Kindle. This will increase reading, but not as many books per year as when the family shared a Kindle.
Multiple coworkers 'jumped off the fence' and have already ordered a Kindle. Something about the 'below $100 price point.' None of these coworkers read more than thirty books per year.
I know of a few grandmothers who will buy grandkids Kindles. Some of those grandkids are voracious readers (that is good...). Some of the grandkids will say a polite 'thank you' and never buy more than one or two books for the Kindle. :(
I also know of a few parents (mostly the moms) who still eread on smartphones or a laptop. In general, those that didn't buy a Kindle or Nook in the past were those that read less than twenty books per year. More than a few will buy a Kindle (or Nook, if the price drops enough) this holiday season for themselves (or buy it for the hubby to put under the tree). ;)
Most of the potential Kindle customers seem undecided between the $79 Kindle, $99 touch Kindle, and $99 Keyboard Kindle. Or even splurging on the $199 Fire... Amazon gave customers too much choice! Perhaps the mid-November ship date is having customers wait to decide? However, birthdays and the holidays put a forcing function on the buying decision. I would be surprised if some of the Kindles didn't sell out and force the selection decision.
I estimate that these lower cost Kindles might sell as few as half the ebooks per Kindle as the earlier Kindle sales. The lower price points are reaching out to less intense readers. However, that is a good thing; it still expands the customer base. I hope low cost ereader sales will turn some 'moderate readers' back into 'intense ereaders.' e-readership is known for 'convenience reading' which increases the quantity of books sold. :)
Neil
Why? Many of the early adopters of the Kindle read over a hundred books per year.
I know of one individual who is buying 'extra Kindles' to avoid the inconvenience of forgetting to pack a Kindle for travel or even walk across the house! That will increase the reading a little (in particular not forgetting the Kindle on a six-week trip...), but only incrementally.
I know of several families who either made their kids share a Kindle or wouldn't risk giving a $139 device to that young of a child who will be buying a new lower cost Kindle. This will increase reading, but not as many books per year as when the family shared a Kindle.
Multiple coworkers 'jumped off the fence' and have already ordered a Kindle. Something about the 'below $100 price point.' None of these coworkers read more than thirty books per year.
I know of a few grandmothers who will buy grandkids Kindles. Some of those grandkids are voracious readers (that is good...). Some of the grandkids will say a polite 'thank you' and never buy more than one or two books for the Kindle. :(
I also know of a few parents (mostly the moms) who still eread on smartphones or a laptop. In general, those that didn't buy a Kindle or Nook in the past were those that read less than twenty books per year. More than a few will buy a Kindle (or Nook, if the price drops enough) this holiday season for themselves (or buy it for the hubby to put under the tree). ;)
Most of the potential Kindle customers seem undecided between the $79 Kindle, $99 touch Kindle, and $99 Keyboard Kindle. Or even splurging on the $199 Fire... Amazon gave customers too much choice! Perhaps the mid-November ship date is having customers wait to decide? However, birthdays and the holidays put a forcing function on the buying decision. I would be surprised if some of the Kindles didn't sell out and force the selection decision.
I estimate that these lower cost Kindles might sell as few as half the ebooks per Kindle as the earlier Kindle sales. The lower price points are reaching out to less intense readers. However, that is a good thing; it still expands the customer base. I hope low cost ereader sales will turn some 'moderate readers' back into 'intense ereaders.' e-readership is known for 'convenience reading' which increases the quantity of books sold. :)
Neil
Why the talk of Vinyl and Paper books?
Vinyl made a comeback with 2.8 million albums in 2010
Music's lost decade has been brutal. $14.6 billion a year in sales down to $6.3 Billion in 2009 and the above link says sales declined 2.4% or to about %6.1 Billion in 2010.
Why is this held up as a model for print? I fully expect print to survive. However, the librarians I know are being inundated with books handed over from the Boarders bankruptcy.
Now ebooks are different than music. Napster dominated music as there was no usable and legitimate way to load mp3s until 2003 and the iTunes store opened. Read the link, music is still dominated by piracy. eBooks are being led by legitimate outlets.
I expect print to remain a good fraction of the book market. Perhaps 20% of the revenue. How much is Vinyl? Assuming $25 per record, I calculate Vinyl is 1.15% of the music market. I probably overestimate the price per album... So let's be generous to Vinyl and call it one percent.
Why so much noise over about one percent of the market! I'd be happy if print were to survive at 20% to 30% of the market. I fervently hope print does better than a lonely one percent.
Neil
Music's lost decade has been brutal. $14.6 billion a year in sales down to $6.3 Billion in 2009 and the above link says sales declined 2.4% or to about %6.1 Billion in 2010.
Why is this held up as a model for print? I fully expect print to survive. However, the librarians I know are being inundated with books handed over from the Boarders bankruptcy.
Now ebooks are different than music. Napster dominated music as there was no usable and legitimate way to load mp3s until 2003 and the iTunes store opened. Read the link, music is still dominated by piracy. eBooks are being led by legitimate outlets.
I expect print to remain a good fraction of the book market. Perhaps 20% of the revenue. How much is Vinyl? Assuming $25 per record, I calculate Vinyl is 1.15% of the music market. I probably overestimate the price per album... So let's be generous to Vinyl and call it one percent.
Why so much noise over about one percent of the market! I'd be happy if print were to survive at 20% to 30% of the market. I fervently hope print does better than a lonely one percent.
Neil
Wednesday, September 28, 2011
$99 Ereaders
Amazon just dropped the knife on ereader prices via the 'with offers' (add supported Kindles).
Thre Kindles $99 and under.
The new $79 Kindle
The new $99 Kindle touch
The renamed $99 Kindle Keyboard (ex-K3 with Special offers)
Figure 11 shows how many people would, by an older survey, buy ereaders at each price point. I'm going to sum the numbers:
Above $400 1% of the market
Above $300 4% of the market (3% of $300 plus the sum of the higher price points)
Above $200 15% of the market (again, summing the price points)
Above $100 46% of the market will consider an ereader.
Now that we're $79 to $99, 79% of the buying base of ereaders will consider an ereaer. Just by lowering the price of the ereader, the ebook market should grow 71%!
But wait... we still had 'resistance' to ereaders who are 'giving in' and buying an ereader. This is readers 'pulled' to ereaders.
The Boarders BK will 'push' further readers to ereaders.
2012 will have tremendous growth in ebook sales. The last price point of resistance is to get below $50. Amazon has a goal for next Christmas. ;)
Neil
Ps (Late edit)
I noticed the new 'Kindle' and 'Kindle Touch' are lighter than the 'Kindle Keyboard' (renamed-K3 w/special offers). I'm still using my K2 and found the lighter weight of the 'Kindle Keyboard' one of its best features.
Thre Kindles $99 and under.
The new $79 Kindle
The new $99 Kindle touch
The renamed $99 Kindle Keyboard (ex-K3 with Special offers)
Figure 11 shows how many people would, by an older survey, buy ereaders at each price point. I'm going to sum the numbers:
Above $400 1% of the market
Above $300 4% of the market (3% of $300 plus the sum of the higher price points)
Above $200 15% of the market (again, summing the price points)
Above $100 46% of the market will consider an ereader.
Now that we're $79 to $99, 79% of the buying base of ereaders will consider an ereaer. Just by lowering the price of the ereader, the ebook market should grow 71%!
But wait... we still had 'resistance' to ereaders who are 'giving in' and buying an ereader. This is readers 'pulled' to ereaders.
The Boarders BK will 'push' further readers to ereaders.
2012 will have tremendous growth in ebook sales. The last price point of resistance is to get below $50. Amazon has a goal for next Christmas. ;)
Neil
Ps (Late edit)
I noticed the new 'Kindle' and 'Kindle Touch' are lighter than the 'Kindle Keyboard' (renamed-K3 w/special offers). I'm still using my K2 and found the lighter weight of the 'Kindle Keyboard' one of its best features.
Monday, September 26, 2011
25 to 30 million e-ink ereaders in 2011
E-ink is reporting that they'll meet projections for ereaders in 2011.
I found this bit interesting:
But global shipments of e-book readers experienced a seasonal dip in the second-quarter, according to IDC. Shipments reached nearly six million units in first-quarter 2011, but shipments in the second quarter totaled 5.4 million units, up 167% on-year but down 9.2% on-quarter.
Amazon Kindle's market share slid to 51.7% in the second-quarter from about 53% in the first, while Barnes & Noble's Nook dropped to 21.2% from about 23%, according to IDC.
Amazon is barely holding onto half the market. Since they are the most 'indie-friendly' ebookstore, that is bad on one hand... on the other, it is good not to have a market dominance.
I blogged before don't count on keeping the market lead. For example, For the last 3 months in the US Android cell phones have outsold iPhones two to one. I'm surprised to see B&N and Kindle both lost market share. I'm wondering who gained? (Google? Apple? With Boarders going kaput, I doubt it was Kobo and Microsoft dropped their initiative.)
Got Popcorn?
Neil
Ps
This doesn't include tablets.
The above sales figures show that ereaders sell ok in the 1st and 2nd quarters but are really a back to school and holiday phenomenon. 1H2011 11.4Million out of 25 to 30 million (e-ink). I suspect we'll see another 5 million LCD ereaders in 2011. So the 2nd half of the year is about 2/3rds of the sales. Hence why Amazon is waiting on their new ereaders, tablet, and B&N the rumored new Nook tablet right before the holidays.
I'm big into cell phones as 'convenience readers.' We recently returned from a cruise and for every reader on a Kindle, I saw one on a smartphone, one on a tablet (almost all iPads, a few Samsungs, but not many), and three to five playing games on their cellphones or tablets. :( And for each Kindle reader two reading pbooks. :) Mind you, it was a Disney cruise, so lots of waiting in line. ;)
So only somewhat related, Microsoft's phone strategy baffles me. February is too late for Nokia. B&N showed how it should be done. The nook color October 2010, Nook simple-touch in
updated 12:40pm
I found this bit interesting:
But global shipments of e-book readers experienced a seasonal dip in the second-quarter, according to IDC. Shipments reached nearly six million units in first-quarter 2011, but shipments in the second quarter totaled 5.4 million units, up 167% on-year but down 9.2% on-quarter.
Amazon Kindle's market share slid to 51.7% in the second-quarter from about 53% in the first, while Barnes & Noble's Nook dropped to 21.2% from about 23%, according to IDC.
Amazon is barely holding onto half the market. Since they are the most 'indie-friendly' ebookstore, that is bad on one hand... on the other, it is good not to have a market dominance.
I blogged before don't count on keeping the market lead. For example, For the last 3 months in the US Android cell phones have outsold iPhones two to one. I'm surprised to see B&N and Kindle both lost market share. I'm wondering who gained? (Google? Apple? With Boarders going kaput, I doubt it was Kobo and Microsoft dropped their initiative.)
Got Popcorn?
Neil
Ps
This doesn't include tablets.
The above sales figures show that ereaders sell ok in the 1st and 2nd quarters but are really a back to school and holiday phenomenon. 1H2011 11.4Million out of 25 to 30 million (e-ink). I suspect we'll see another 5 million LCD ereaders in 2011. So the 2nd half of the year is about 2/3rds of the sales. Hence why Amazon is waiting on their new ereaders, tablet, and B&N the rumored new Nook tablet right before the holidays.
I'm big into cell phones as 'convenience readers.' We recently returned from a cruise and for every reader on a Kindle, I saw one on a smartphone, one on a tablet (almost all iPads, a few Samsungs, but not many), and three to five playing games on their cellphones or tablets. :( And for each Kindle reader two reading pbooks. :) Mind you, it was a Disney cruise, so lots of waiting in line. ;)
So only somewhat related, Microsoft's phone strategy baffles me. February is too late for Nokia. B&N showed how it should be done. The nook color October 2010, Nook simple-touch in
updated 12:40pm
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