Amazon Testing a Smartphone
TAIPEI—Amazon.com Inc. is working with component suppliers in Asia to test a smartphone, people familiar with the situation said, suggesting that the Internet retail giant, which sells the Kindle Fire tablet computers, is considering broadening its mobile-device offerings.
Context & Ripple Effects
The Wall Street Journal's supply-chain report lands a week after Bloomberg reported Amazon was planning a smartphone to vie with Apple, and it converts that financial-press rumor into physical evidence: component suppliers in Asia are reportedly testing hardware for the retailer. The idea is not new to markets — Citigroup flagged an Amazon phone for 2012 as far back as November 2011 — but supplier-level testing is the stage where such projects typically become real or die.
What makes the claim credible rather than speculative is the Kindle Fire precedent: Amazon has already shown it will sell hardware at thin margins as a storefront for its retail and media business, so a phone would extend a proven playbook rather than start one. The breadth of same-day pickup — ZDNet, The Verge, Gizmodo, Forbes, Engadget, CNET, Phone Arena and Android Phone Fans all carried the report — shows how much weight the market gives any Amazon hardware signal.
First-order effects
- Asian component suppliers gain a potential high-volume customer beyond the established handset makers, and Amazon's rumored entry — still unconfirmed by the company — moves from analyst speculation to active prototyping.
- Amazon's device team shifts focus from defending the Kindle Fire tablet line to validating a phone design, putting the retailer on a direct collision course with Apple and Android handset makers in its customers' pockets.
Second-order effects
- Apple, Samsung and Google must now price and position against a competitor willing to sell hardware at cost to drive commerce, pressuring margins in the mid-tier smartphone segment where the Kindle Fire playbook would most plausibly land.
- Wireless carriers face a new class of negotiating partner: a retailer whose leverage comes from its customer base and content catalog rather than handset brand equity.
Third-order effects
- If the pattern holds, the structural shift is retail platforms owning the endpoint: devices become acquisition channels for commerce and media subscriptions, decoupling hardware profit from hardware sales and forcing incumbents to compete on ecosystem economics rather than device specs alone.
The trend: Large internet retailers are moving from selling other companies' phones to building their own, using subsidized hardware to lock in the customer relationship end to end.