Amazon Kindle Expensive But Not Overpriced

I often said that although I’d like to buy an Amazon Kindle 2, I’m not sure I can justify it relatively expensive (for me) high cost in relation to how often I might actually use it to actually read an ebook. So, while I consider it expensive, I was not sure if it was also overpriced. After reading this item in Businessweek…

The True Cost of Amazon’s New Kindle

…I headed over to iSuppli to see their component breakdown information…

Amazon’s Kindle 2 Costs $185.49 to Build, iSuppli Teardown Reveals

The two most expensive component (unsurprisingly)…

- $60: E Ink Display
- $39.50: Novatel Wireless Broadband Radio

This accounts for 53.6% of the total component cost and 27.7% of the retail cost ($359). As the Businessweek article notes, the $185.49 component/materials cost is 51.7% of the $359 retail cost.

One item not included in the physical cost is the free lifetime wireless 3G data service from Sprint. I assume (but have not verified) that Sprint gets some small initial percentage from each Kindle sale and then another small percentage from each ebook or emagazine sale.

I had assumed that the Kindle’s component cost was closer to a third of its retail cost (about $120). So, perhaps, the Kindle is still to expensive (for me and my reading habits) but is not overpriced. And, assuming that the E Ink display and Novatel wireless components will not drop in price anytime soon, we probably won’t see a Kindle in the $200 retail price range for the forseeable future.

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