The rock-bottom price of the new Kindle Fire tablet computer is raising questions about Amazon.com Inc's ability to keep up with demand and the device's effect on the company's already razor-thin profit margins.
Amazon's billionaire Chief Executive Jeff Bezos unveiled the Fire on Wednesday at a lower-than-expected price of $199.
Bezos said Amazon is making "millions" of the tablets, without being more specific. However, he urged customers to pre-order the device early.
"When Bezos quipped that people should get their pre-orders in quick, that wasn't just a sales pitch," said Brian Blair, an analyst at Wedge Partners. "That was him warning this will sell out."
When the first Kindle came out in 2007, Amazon hadn't made enough and the e-reader sold out in less than a week. That meant the company missed out on sales and got the device into fewer customers' hands, limiting quick adoption.
"I hope they learned their lesson from the last time," said Vinita Jakhanwal, an analyst at IHS iSuppli, which tracks electronic component supply chains.
Amazon spokeswomen didn't respond to a request for comment on Thursday.
Amazon has lined up about four to five million screens for the Fire in the fourth quarter, which is a "fairly significant" amount, Jakhanwal added.
The technology that is being used for the Fire's screen has been around for at least a year and already has been produced in high volume, reducing the chances of supply shortages, Jakhanwal said.
One of the components that was in shorter supply in the first half of 2011 was the 10-inch screen, mostly because of Apple Inc's blockbuster-selling iPad, according to Bradley Gastwirth of technology research firmABR Investment Strategy.
"This is probably one of the main reasons why Amazon started off at the 7-inch form factor," he said.
Still, other specialized components may be in short supply and that could limit how many Kindle Fire's can be made quickly, Jakhanwal said.
Other components aren't known yet, according to Wedge's Blair. But he expects a re-run of 2007, with the Fire selling out quickly.
QUANTA CONNECTION
Taiwan's Quanta Computer Inc , the world's top contract laptop PC maker, is the assembler of the Fire, according to a source close to the company and several analysts, and makes it at a plant in China.
Quanta recently scaled down its production line in Taiwan, reportedly on a drop in orders from BlackBerry maker Research In Motion Ltd for its struggling PlayBook tablet device.
Some US analysts have suggested that Quanta may be able to use some excess inventory from the RIM tablet for the Fire, thus helping avoid possible shortages.
But the source and analysts said this theory was wrong. "It's impossible to share because they use very different components, for example for the CPUs and panel sizes," said Fubon Securities analyst Arthur Liao.
Shares of Quanta jumped on Friday, closing up 5.7 per cent, versus a 0.6 per cent rise in the broader market .
Amazon's billionaire Chief Executive Jeff Bezos unveiled the Fire on Wednesday at a lower-than-expected price of $199.
Bezos said Amazon is making "millions" of the tablets, without being more specific. However, he urged customers to pre-order the device early.
"When Bezos quipped that people should get their pre-orders in quick, that wasn't just a sales pitch," said Brian Blair, an analyst at Wedge Partners. "That was him warning this will sell out."
When the first Kindle came out in 2007, Amazon hadn't made enough and the e-reader sold out in less than a week. That meant the company missed out on sales and got the device into fewer customers' hands, limiting quick adoption.
"I hope they learned their lesson from the last time," said Vinita Jakhanwal, an analyst at IHS iSuppli, which tracks electronic component supply chains.
Amazon spokeswomen didn't respond to a request for comment on Thursday.
Amazon has lined up about four to five million screens for the Fire in the fourth quarter, which is a "fairly significant" amount, Jakhanwal added.
The technology that is being used for the Fire's screen has been around for at least a year and already has been produced in high volume, reducing the chances of supply shortages, Jakhanwal said.
One of the components that was in shorter supply in the first half of 2011 was the 10-inch screen, mostly because of Apple Inc's blockbuster-selling iPad, according to Bradley Gastwirth of technology research firmABR Investment Strategy.
"This is probably one of the main reasons why Amazon started off at the 7-inch form factor," he said.
Still, other specialized components may be in short supply and that could limit how many Kindle Fire's can be made quickly, Jakhanwal said.
Other components aren't known yet, according to Wedge's Blair. But he expects a re-run of 2007, with the Fire selling out quickly.
QUANTA CONNECTION
Taiwan's Quanta Computer Inc , the world's top contract laptop PC maker, is the assembler of the Fire, according to a source close to the company and several analysts, and makes it at a plant in China.
Quanta recently scaled down its production line in Taiwan, reportedly on a drop in orders from BlackBerry maker Research In Motion Ltd for its struggling PlayBook tablet device.
Some US analysts have suggested that Quanta may be able to use some excess inventory from the RIM tablet for the Fire, thus helping avoid possible shortages.
But the source and analysts said this theory was wrong. "It's impossible to share because they use very different components, for example for the CPUs and panel sizes," said Fubon Securities analyst Arthur Liao.
Shares of Quanta jumped on Friday, closing up 5.7 per cent, versus a 0.6 per cent rise in the broader market .
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