Will users tolerate a potentially lower quality experience just because a device cost $50?
Critics blasted Amazon for pricing its Fire smartphone equal to the iPhone last year, despite throwing in a free year of the otherwise $99 Prime membership. The handset’s sales fizzled, and steep price cuts couldn’t boost sales. In October, the company said it would take a $170 million write-down primarily for unsold inventory.
After the Fire phone flop, Amazon reorganized its hardware-development center known as Lab126 and laid off dozens of engineers who worked on the device, according to people familiar with the matter. The division has developed Fire tablets, Kindle e-readers, the Fire TV set-top box and other devices.
Amazon has curtailed some of its more ambitious projects like a projector device, a smart stylus and 14-inch tablet, as The Wall Street Journal reported last month. It is still working to develop a high-end computer for the kitchen code-named Kabinet, a tablet with a 3-D screen and an e-reader battery that can last two-years on a single charge, people familiar with the matter said.
To lower costs for the new 6-inch tablet, Amazon outsourced much of the development to overseas firms including Shanghai Huaqin Telecom Technology Co. and Taiwan’s Compal Communications Inc., rankling some at its Lab126 unit, two of the people said. Compal has previously worked with Apple and Hewlett-Packard Co., among others. Representatives of Shanghai Huaqin and Compal didn’t respond to requests for comment.
The 10-inch tablet would be bigger than Amazon’s existing Fire HDX tablet, which touts an 8.9-inch screen and tops out at about $600.
Amazon’s cheapest current Fire tablet has a 6-inch screen and sells for $99, including advertisements that appear as screensavers, or $114 without the ads. It isn’t clear whether the $50 price for the newest tablet includes ads.