Supply Chain Numbers Hint at Trouble for Tablet Makers

Amazon Kindle Fire

Amazon Kindle FirePure hardware tablet makers such as Hewlett-Packard, Acer, Asus and Dell may have trouble keeping up with aggressively priced devices sold by digital content retailers, and will eventually be forced out of the market, according to a Digitimes report.

Amazon’s Kindle Fire and, more recently, Barnes & Noble’s Nook Tablet, are the culprits. They’re sold at a low profit margin or even at a loss, according to some reports, in order to attract more sales.

Since they don’t profit directly from device sales but from digital content sold through the tablets, these companies can afford to undercut prices by hundreds of dollars.

By the same logic, sources from companies upstream in the supply chain believe retailers may end up offering their tablets for free. As unrealistic as it sounds, they have a point: Pure hardware tablet makers can go low on their profit margins, but Amazon will always be able to go lower. I’ve made a similar comment the week the Kindle Fire was announced, and these opinions makes the argument more convincing.

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