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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.

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.

ChangeWave

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.



88 Comments

realistic 15 Years · 1154 comments

This is good news? Amazon loses money on each unit sold. The old I can't make money on each unit sold but I'll make up for that with volume.

red oak 14 Years · 1107 comments

Amazon is going to lose $300MM this quarter. The holiday shopping season. Apple will earn $10 billion.

Amazon is winning

drdoppio 15 Years · 1129 comments

I bet Amazon are kicking themselves in the back for not announcing the Kindle Fire at $250. They would have broken even on the production costs and still sold a couple million Kindles without breaking a sweat.

saarek 17 Years · 1593 comments

I have to admit to being tempted by the Kindle Fire myself.

I love my iPad but mostly use it for music, books/newspapers and the odd game of Angry Birds, rather than getting an iPad 3 next year I might trade down to one of these.

Will wait for actual reviews of the device first.

dunks 17 Years · 1252 comments

I mostly like the new kindle lineup. It's not a Jony Ive standard of design but they're not as fugly as some of their competitors either. Time will tell if the quality of the content is going to justify the investment in the ecosystem. They are definitely getting a leg up from the success of the App Store though. You only have to look at the apps they are showcasing in their promotional materials. The want you to think you can have the app store experience for half the price.

$200 is A pretty compelling price point, but if they're losing that much per device it's going to be a bumpy ride for the next few months. I can see alot of people spending $200 for the web browser, 99c for handful of apps and then shafting the rest of the paid services.