iSuppli: $359 Kindle 2 costs $185 to build, Whispernet says shhh

Ever wonder how Amazon was able to bundle unlimited Whispernet (Sprint EVDO) with the Kindle 2? To start with, eBooks are small, really small in the context of digital media downloads (music, audio-books, movies) so there's little impact to the Sprint network. Kindle 2 is also sporting a pretty healthy markup to cover the data fees. After conducting its own teardown and analysis, iSuppli estimates that the Kindle 2 costs just $185.49 for materials and manufacturing. The estimate does not include the costs related to marketing, distribution, class-actions, or the pain you feel at having learned the true definition of free. Full press release after the break.

Amazon's Kindle 2 Costs $185.49 to Build, iSuppli Teardown Reveals

El Segundo, Calif., April. 22, 2009-Amazon.com Inc.'s new Kindle 2 eBook carries $185.49 in materials and manufacturing costs, according to a dissection conducted by iSuppli Corp.'s Teardown Analysis Service.
The direct material cost of the Kindle 2, consisting of all parts used to make the product, amounts to $176.83. When adding in the conversion costs-i.e., manufacturing expenses and the battery-the total rises by $8.66 to $185.49.
The total materials and manufacturing costs reported in iSuppli's teardown analysis of the Kindle 2 reflect only the costs for direct materials, manufacturing and basic tests. Not included in this analysis are costs above and beyond the material manufacturing of the core device itself-i.e., the cost of intellectual property, royalties and licensing fees; those not already included into the per component price-software, software loading and test, shipping, logistics marketing; and other channel costs. These costs are not included because teardowns cannot reveal this type of information.
The combined manufacturing and materials costs represent 51 percent of the Kindle 2's $359 retail price.
The attached table presents a summary of the major cost drivers for the Kindle 2.

Black ink for E Ink
iSuppli estimates that $60, or 41.5 percent of the materials cost of the Kindle 2, is accounted for by the E Ink Corp. display module, which represents the centerpiece of the product.
"The showcase feature of the Kindle is its E-Ink display, which not only is easy on the eyes, but also employs electrophoretic bistable technology that allows it to show an image even when it's not drawing power," said Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli.
"The new version of the E Ink display in the Kindle 2 supports 16-level grayscale images, rather than the 4-level version used in the previous-generation hardware. This makes the Kindle 2's display look like a printed page."
Rassweiler noted that the bistable display for the Kindle 2 obtained by iSuppli continues to display the warning message "Critical Battery" even after the product was completely dissembled for the teardown. With no power or electronic control to refresh the image, the display will be frozen in this state forever.

Kindle 2 takes turnkey wireless approach
After the display, the next largest cost driver in the Kindle 2 is the wireless broadband module, provided by Novatel Wireless Inc. Priced at $39.50, the module accounts for 27.3 percent of the materials cost of the Kindle 2. The module supports the CDMA2000 1X EV-DO Rev A air standard.

In the first-generation Kindle, the wireless functionality was provided by an integrated chipset that was an integral part of the main printed circuit board. In the second-generation Kindle, the wireless functionality has been divorced from the core design and instead uses Novatel's turnkey module.
The use of a standard module like this makes the Kindle 2 easier to design. Furthermore, since Novatel manufactures many different wireless modules, it buys components in high volume, which represents leverage it can use to negotiate prices down with suppliers such as Qualcomm Inc., whose device represents the integrated circuit core of the wireless module.

Qualcomm Inc.'s MSM6801A single-chip baseband processor is priced at $13.18, iSuppli estimates.
The wireless connection runs behind the scenes, providing an always-on invisible link to Amazon's library of electronic book content.

Another key element of the Kindle is Freescale Semiconductor Inc.'s MCIMX31LVKN5C multimedia application processor, priced at $8.64. The Freescale processor is based on an ARM11 microcontroller core, which runs at a clock speed of 532MHz. Freescale also contributed its MC13783VK5 audio circuit and power-management IC.