Costs of Amazon's Kindle Fire fall, allowing price cut

The parts that go into the Kindle Fire cost $133.80, according to a recent estimate by IHS iSuppli, which tracks technology supply chains. That is down about 28 percent from November 2011, when IHS estimated the components cost $185.60.

Most of the decline has been driven by falling prices for memory chips, displays and touch screens, according to IHS.

"Memory prices have been in free fall - with roughly a 50 percent price reduction in the past year," said Brad Gastwirth of independent research firm ABR Investment Strategy. "On the display side prices have also come down."

Amazon is expected to launch a new version of the Kindle Fire later this year and some analysts think the company will cut the price.

"They will be able to keep it fairly competitive because memory prices have come down dramatically," Gastwirth said.

When Amazon launched the Fire last year, it priced the device at $199, which was lower-than-expected at the time.

"Amazon will be very aggressive here," said Robert Brunner, founder of Ammunition, which has helped Barnes & Noble design its Nook devices. "If they can drop the component costs, they will cut the retail price aggressively."

Copyright Thomson Reuters 2012