The cost of making Kindles

Since launching its Kindle electronic reader, Amazon.com has kept sales figures and other details of the device a closely guarded secret. Now research firm iSuppli is taking a stab at estimating the production costs of the Kindle 2. The conclusion? Amazon spends $185.49 on materials and manufacturing of the second-generation reader -- about half the device's $359 price tag.

Kindle's biggest cost is the E-ink display technology, followed by its wireless broadband module from Novatel Wireless, according to iSuppli's analysis. Here's the full cost breakdown:

iSuppli didn't take into account other Kindle costs such as software development and marketing, but its analysis provides some food for thought. Amazon CEO Jeff Bezos, at the launch event for Kindle 2 in February, defended the Kindle's $359 price tag:

If you look at the cost of this device - it has a sophisticated EVDO radio, it has the latest electronic display - if we could make this device cheaper we would. But we can't. There's a lot of technology pushed into this little tiny package. It is what it is.

Asked about the iSuppli analysis, Amazon spokesman Drew Herdener said the company does not comment on rumors or speculation.

In an interview in November, Ian Freed, the Amazon executive in charge of Kindle, told me the readers are manufactured in China. Amazon hasn't disclosed sales of Kindle, though TechCrunch, citing a source close to the company, recently reported that 300,000 Kindle 2s have been shipped to date -- about double the rate of the original Kindle.

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