E-Readers' Price May Fall to $150 This Year With New Chip, Freescale Says
Freescale Semiconductor Inc., whose products power about 90 percent of electronic book readers, said a new chip will help drive down the price of the devices to less than $150 this year.
Context & Ripple Effects
Freescale sits upstream of nearly the whole category: its chips power about 90 percent of e-book readers, so its component roadmap effectively sets the devices' cost floor. The push toward cheaper hardware has been building since late 2008, when a new entrant undercut the Kindle and Sony Reader on price, and publishers have been circling since Hearst announced plans for a wireless e-reader of its own in early 2009.
A sub-$150 device would put dedicated readers squarely in impulse-purchase territory, below where Amazon and Sony have priced their flagship models, and gives newspaper and magazine publishers a hardware path that does not depend on licensing someone else's platform.
First-order effects
- Device makers building on Freescale silicon can reprice dedicated readers below $150 within the year, directly pressuring Amazon's Kindle and Sony's Reader lineups on shelf price.
- Freescale converts its ~90 percent component share into category-wide leverage: one chip launch moves the entire market's price point at once.
Second-order effects
- Publishers weighing their own hardware, like Hearst with its planned wireless reader, get a bill-of-materials low enough to subsidize the device against content sales rather than profit from it.
- Amazon and Sony face a forced choice between matching the lower price, cutting margins, or leaning harder on bundled content and wireless service to justify a premium.
Third-order effects
- With a single supplier defining the cost curve for nine in ten readers, e-reader economics consolidate around whoever controls the reference design — hardware margin migrates to the chip vendor while device brands compete on content ecosystems.
- If sub-$150 pricing holds, dedicated readers split from general-purpose tablets on price, becoming commodity appliances sold near cost to lock in book and periodical purchases.
The trend: Dedicated e-reader hardware is riding a component-driven cost curve toward mass-market pricing, with the dominant chip supplier — not the device brands — setting the pace.