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Report: Kindle Fire Clinches No. 2 Spot in Tablet Wars

Fri, 12/02/2011 - 7:00am
Andrew Berg

Amazon's Kindle Fire tablet is wasting no time in capturing its share of the media tablet market. Just two weeks after its introduction, the Kindle Fire has taken second place in the global media tablet business in the fourth quarter, according to a report from IHS iSuppli.

Coming up from zero in the third quarter, Amazon will ship 3.9 million Kindle Fire tablets during the last three months of 2011, according to a preliminary projection from IHS iSuppli.

This will give Amazon a 13.8 percent share of global media tablet shipments in the fourth quarter, exceeding the 4.8 percent held by Samsung, which holds the No. 3 spot, and second only to Apple's commanding 65.6 percent portion of the market.

The report estimates that additional shipments of the Kindle Fire will contribute to a 7.7 percent increase in the IHS forecast of total media tablet shipments in 2011.

"Initial market response strongly suggests that Amazon, with the Kindle Fire, has found the right combination of savvy pricing, astute marketing, accessible content and an appropriate business model, positioning the Kindle Fire to appeal to a brand-new set of media tablet buyers. The production plans make it clear that Amazon is betting big on the product," wrote Rhoda Alexander, senior manager, tablet and monitor research for IHS, in statement.

IHS now predicts global media tablet market shipments will amount to 64.7 million units in 2011, compared to the previous forecast issued in August of 60 million. The total shipment level represents 273 percent growth from 17.4 million units in 2010.

The forecast for the following years also has been increased, with shipments expected to rise to 287.2 million in 2015, up from the previous forecast of 275.3 million, as shown in the figure attached.

"At a rock bottom price of $199 – which is less than the $201.70 it now costs to make the device – the Kindle Fire has created chaos in the Android tablet market," Alexander said. "Most other Android tablet makers must earn a profit based on hardware sales alone. In contrast, Amazon plans to use the Kindle Fire to drive sales of physical goods that comprise the majority of the company's business. As long as this strategy is successful, the company can afford to take a loss on the hardware – while its Android competitors cannot."

IHS suggests that the lower prices of the Kindle Fire could push Apple to reduce prices of the iPad 2 to be more competitive when the iPad 3 launches.

"This will provide a value alternative for entry-level users in the same way that the company continued to offer the iPhone 3 when it rolled out the iPhone 4," the reports states, suggesting this approach would allow Apple to maintain its target profit margins on both the iPad 3 and the iPad 2, while offering end-users an ever-expanding family of products.

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