Overview / Main Features
Electronic book readers or 'ebook readers' remains to have a niche appeal to consumers despite the success of the iPad, and forthcoming tablet "iPad alikes devices. There is still a place and a use case for the serious reader as well as users in domains such as technical documents, universities (text books), etc. Let's face it, without EPD display (also known more popularly under the brand name ""E Ink"), there would be no eBook readers. These book readers exist because of that unique technology.
Apple spent a huge piece of their hardware budget in on their AFFS display technology on the iPad so that they could 'compete', to an extent, with eBook readers in terms of key features like 'viewability' and battery life. The display, was by far the biggest single cost driver in the iPad as a result, but battery life and ease of readability cannot compete with EPD for pure eBook reading purposes. EPD displays only use energy when the screen refreshes or changes image, otherwise, it's like an 'etch-a-sketch' toy with the last refreshed image 'tattooed' on the screen - no further energy required until the screen changes again. That's how the kindle can manage it's incredible battery life of one month (!).
eReaders with their eye-friendly EPD displays (nothing else looks so much like the printed page), and super long battery life, just do things that the tablets can't, and vice versa. So for now, the place of eBook readers in the market is, to some extent safe.
The fundamental difference in display technologies defines the line between tablet and book readers, and the EPD technology is so different with respect to refresh rate (not to mention the monochrome aspect), AND the absence of touchscreens on the Kindle (yes it still has a QWERTY keyboard under the screen and navigation buttons), makes the usage, use case and cost structures very different. Large touchscreens can be very expensive, but EPDs slow refresh rate would make the feature pointless, so keyboard it is.
As a result in addition to the display, other key features in the Kindle would be (from a cost perspective) the HSPA wireless module (from AnyData) which allows, at no cost to the buyer, an always on connection to the wireless network by which all users download their content. The module is actually pricier than the display.
In the first Kindle, the wireless functionality was provided by an integrated wireless chipset that was an integral part of the main PCB. Lab126, the wholly owned Amazon design house, who designed this product, has chosen, in the second and third generations, to divorce the core design of wireless functionality, and have decided instead to source the functionality in the form of a turnkey module from 3rd parties who specialize in building turnkey modules. The second generation Kindle featured a Novatel wireless CDMA/EvDO module, this time it's AnyData WCDMA/HSPA. Module.
This approach has multiple advantages. First of all, it liberates Lab126 from having to possess wireless design expertise (a specialized area) and leaves this work to a domain expert who may also have greater supplier leverage. But this modular approach allows Amazon to partner with any wireless service provider with a switch of the module, but can also roll out their product internationally on different networks and adapt the same core design in this way.
Other high cost features include the 4GB of NAND flash which represents the bulk storage for the Kindle (note it's a fraction of the content offered on the iPad, but the content is much less 'rich'), the Li-Polymer battery (which apparently allows for a month of usage!), DRAM to support the apps processor, and then the Freescale apps processor itself, an ARM based device that is a catalog part from them.
Book enthusiast consumers but also students, professionals with a need to access large amounts of written material (law libraries, medical libraries, tech service / repair manuals), etc.
July 28, 2010
Pricing - $189 USD at the time of release, and currently, at the time of writing (October 6, 2010).
Availability - Global
For the purposes of this teardown analysis, we have assumed a lifetime production volume of 2.5M units over 1-2 years.
As a reminder, teardown volume production assumptions are primarily used for our cost analysis in terms of amortized NRE and tooling costs, especially for custom components specific to the model being analyzed (mechanical components especially). Unless assumed, volumes increment by an order of magnitude. Minor changes in volume (say 1 million vs. 2) rarely have a large net effect on our final analysis.
Overall the Kindle 3rd generation hardware is a complete refresh of the last generation Kindle, but the numbers are interesting, and suggest that, as with the second generation Kindle, Amazon is likely subsidizing the sale of the hardware, just like we saw with the Playstation 3 for quite a while after it's release. The bottom line is the hardware costs alone, the new Kindle cost Amazon marginally less than their selling price (considering all other cost such as software, IP, marketing, distribution, etc.). It seems that the hardware itself simply is not intended as the money maker - that's the content is the core of their business model.
In teardowns we are not looking at the large picture economics of such devices and are not getting into the nature of their relationships with wireless service providers, for example, and what money exchanges hands there. The economics of subsidized devices are voodoo economics, so to stay grounded, we will stay focused in the costs of the hardware as we see them in the marketplace, the domain of teardown analysis.
The display technology has come down significantly in price since we did the second generation Kindle analysis, from $60 to $38, and should continue to be on a healthy course of cost erosion. Not only did the cost come down, but apparently the specifications have improved.
The wireless module has been a point of contention in our first analysis. When we performed our second gen analysis, we did a ground up full bill of materials analysis for the Novatel module, we added in manufacturing costs, added margins that were typical for Novatel (~30 points gross) and created a sub $40 price tag for the module. Later it was suggested to us, that Amazon was probably paying around $70 for that EvDO module. Regardless of what they might have been paying, we were reflecting what we saw as an achievable-in-the-market price based on a sound methodology. Now with the success of the Kindle, and now that it is being produced in higher volumes, it seems like a solid assumption that they have optimized their supply chain and are now 'in line' with other big players in the space. We have built the cost of the wireless module from the ground up again, and applied slightly higher margins for AnyData to arrive at our module 'price' to Amazon. It's entirely possible that they pay more than this, but this is a benchmark analysis.
Main Cost Drivers Representing ~86% of total materials cost
AnyDATA - DTP-600W - Wireless Broadband Mini PCIe Module Value Line Item - Quad-Band GSM/GPRS/EDGE, Tri-Band WCDMA/HSDPA 3.6Mbps - (Qty:1)
PVI - ED060SC7 - Display Module Value Line Item - 6' Diagonal, Electrophoretic (EPD), 16-Level Greyscale, 600 x 800 pixels, 122.5mm x 90.5mm Viewable Area - (Qty:1)
Samsung Semiconductor - KLM4G1EEHM-B101 - Flash - eMMC, NAND, 4GB, MLC - (Qty:1)
LICO Technology Corp. - S11GTSF01A - Battery - Li-Polymer, 3.7V, 1750mAh - (Qty:1)
Samsung Semiconductor - K4X2G323PB-8GC3 - SDRAM - Mobile DDR, 2Gb (32M x 64), 1.8V, 133MHz - (Qty:1)
Freescale - MCIMX353DJQ5C - Application Processor - ARM11 MCU Core, 532MHz, 90nm - (Qty:1)
Epson - S1D13522 - EPD Controller - (Qty:1)
Atheros - AR6102G-BM2D - WLAN Module - 'Radio-On-Chip for Mobile', 802.11b/g, Contains AR6002GZ Flip Chip, SST RF Die, Crystal & Passives - (Qty:1)
UniMicron Technology - Main PCB - 6-Layer - FR4 - (Qty:1)
Flextronics - A00810-01 - Travel Wall to USB Adaptor - 4.9V, 0.85A - (Qty:1)
Direct Materials + Manufacturing $155.68
What Is Not Included in our Cost Analysis
The total materials and manufacturing costs reported in this analysis reflect ONLY the direct materials cost (from component vendors and assorted EMS providers), AND manufacturing with basic test. Not included in this analysis are costs above and beyond the material manufacture of the core device itself - cost of intellectual property, royalties and licensing fees (those not already included into the per component price), software, software loading and test, shipping, logistics marketing and other channel costs including not only EMS provider and the OEM's margin, but that of other resellers. Our cost analysis is meant to focus on those costs incurred in the manufacture of the core device and exceptionally in some circumstances the packaging and literature as well.
OEM/ODM/EMS Relationships / Manufacturing
Based on the 'Flextronics' marked USB charger (from both the second and third generation hardware), that Flextronics is the EMS partner of choice for Amazon and Lab126.
Country of Origin / Volume Assumptions
The unit is assumed to be assembled in China. Furthermore, we have assumed that custom mechanicals (plastics, metals, etc.) were also sourced in China.
Country of origin assumptions relate directly to the associated cost of manufacturing, where calculated by iSuppli. In the cases of 'finished' sub-assemblies (such as the battery), we do not calculate internal manufacturing costs, but rather assess the market price of the finished product in which case country of origin assumptions may or may not have a direct effect on pricing.
Remember also that labor rates are applied directly only to hand inserted components and systems in our bill of materials, and although regional assumptions do, these new rates do not have a direct effect on our modeled calculations of placement costs for automated SMD assembly lines. ""Auto" inserted components (such as SMT components) placement costs are calculated by an iSuppli algorithm which allocates a cost per component based on the size and pin count of the device. This calculation is affected by country or region of origin as well.
Design for Manufacturing / Device Complexity
The new Kindle has a handful fewer components than it's predecessor, but weighing in at a total of 961 components, the Kindle is inline with smartphones designs from a raw component count perspective.
Much of this is attributable to the wireless module, which was itemized to the sub-component level in this analysis (though it is sources a single unit from Amazon/Flextronics's perspective). Of the total component count of 961 components, 358 are from the AnyData module. The last generation Kindle featured a total of ~1010 components, with 335 from the Novatel module. In any case, both designs are in the same ballpark for complexity.
Component counts have a direct bearing on the overall manufacturing cycle times and costs, and also can increase or decrease overall yields and re-work. Our calculations of manufacturing costs factor counts and more qualitative complexities in the design.
Note that manual labor has a much smaller effect on auto-insertion assembly lines (for the Main PCB, for example), where manufacturing costs are much more capital equipment intensive and driven by these investment costs.
The Kindle 3 has from a design, and not so much a cost perspective, at it's core a catalog Freescale 532MHz ARM11 core processor MCIMX353DJQ5C. The Freescale processor is supported by a Freescale power management chip and user interface IC MC13892AJVL. The second gen was based on a different Freescale chipset that was similar, but this represents an evolutionary design change.
Other major IC content includes an Epson EPD controller (similar to that found in the second gen Kindle - S1DA3522A00B), a Texas Instruments Power Management IC, and an onboard (not part of a module) Atheros 802.11b/g chip for WiFi (AR6102G-BM2D), and a Wolfson audio codec (WM8960GEFL).
The AnyData HSPA module is based on a Qualcomm QSC6270 chipset.
Here is a summary of the major components used in the Amazon Kindle 3rd generation design:
- AnyDATA - DTP-600W - Mini PCIe - Quad-Band GSM/GPRS/EDGE, Tri-Band WCDMA/HSDPA 3.6Mbps
- Baseband Processor / RF Transceiver - Qualcomm - QSC6270 - Single Chip, Quad-Band GSM/EDGE, Tri-Band UMTS / 3.6Mbps HSDPA, 3MP Camera, A-GPS & Bluetooth 2.1+EDR, Integrated Power Management, ARM926EJ-S Core, 65nm
- PVI - ED060SC7 - 6' Diagonal, Electrophoretic (EPD), 16-Level Greyscale, 600 x 800 pixels, 122.5mm x 90.5mm Viewable Area
Main PCB (Core)
- Multimedia Application Processor - Freescale - MCIMX353DJQ5C - ARM11 MCU Core, 532MHz, 90nm
- Freescale - MC13892AJVL - Power Management and User Interface IC
- Texas Instruments - Power Management IC
- EPD Controller - Epson - S1D13522
- Audio Codec - Wolfson Microelectronics - WM8960GEFL - Stereo, w/ Integrated Amplifier
Memory (Doubled since last gen - both DRAM and Flash)
- SDRAM - Samsung Semiconductor - K4X2G323PB-8GC3 - Mobile DDR, 2Gb (32M x 64), 1.8V, 133MHz
- Flash - NAND - Samsung Semiconductor - KLM4G1EEHM-B101 - eMMC, NAND, 4GB, MLC
- Atheros - AR6102G-BM2D - Single-Chip, 802.11b/g