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Thursday, November 10, 2011, 12:07 am PT (03:07 am ET)

Amazon ramps up Kindle Fire production to 5 million units in 2011

Faced with greater than expected demand, Amazon has increased orders for its Kindle Fire tablet to a total of five million by the end of the year, according to a new report out of the Far East.

Taiwanese publication DigiTimes noted the figures on Thursday, citing sources within "upstream component suppliers." Based on recent tablet estimates from research group Gartner, Amazon would pickup roughly 8 percent of the 2011 tablet market if it were to sell all five million units.

The report suggested that Amazon had raised its order volume from 3.5 million to four million in the middle of the third quarter before raising orders again. The significant pre-release interest has come as a bit of a surprise to the company.

Amazon CEO Jeff Bezos said in a press release last month that his company was increasing production capacity for the Fire in order to build "millions more" than originally planned.

But, high demand for the tablet could hurt the company's profit margins in the short term. Amazon has guided for as low as a $200 million loss next quarter.

Kindle Fire


For its part, Apple has rejected concerns that the Fire will hurt sales of its iPad. High-level executives from the company recently indicated to an analyst that they view the competing tablet as good for Apple because it will further fragment the tablet market.

However, if a recent survey is to be believed, 26 percent of Kindle Fire buyers delayed or put on hold an iPad purchase. Among 2,600 respondents, 5 percent said that they had already preordered or were "very likely" to purchase soon the Amazon tablet.

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Announced in September, the 7-inch Kindle Fire will undercut the iPad with its $199 price when it goes on sale next week.

The Fire is said to be kindling for Amazon's broader tablet strategy. Recent reports have suggested that the online retailer will release an 8.9-inch second-generation model next year. According to Concord Securities analyst Ming-Chi Kuo, that device will have an "amazing form factor," though manufacturers may be having a hard time meeting Amazon's requirements for the tablet.