Amazon replaces its budget Fire tablets with Alexa models costing up to $550

Amazon's tablet volume had mostly gone before the Fire was retired. IDC put Amazon at 1.9% of a second-quarter market of 33.6 million units, or about 640,000 tablets ^[15][16][22]. A year earlier the market was roughly 38.2 million units, and 8% of it comes to about 3.1 million ^[23]. That is a fall of roughly 79% in twelve months ^[24].

The near-cost model needed those units. CNA described the Fire line as inexpensive gadgets sold at or near cost to hook customers into Prime Video, Kindle, music apps and the store ^[10]. Under Andy Jassy, CNBC reported, Amazon had already begun charging more, with pricier Echo speakers last year and an Alexa+ subscription for non-Prime members ^[12]. The new $230 entry price is about 48% above the $155 Fire HD 10 ^[1][5][20]. Against the $180 CNA gave for the top Fire HD 10, a tablet Amazon often discounted, the gap is about 28% ^[6][21].

There are three plausible explanations for the higher sticker. The first is memory. CNBC reported a historic surge in memory prices ^[11], and Amazon raised prices on Echos, Kindles and Fire TVs in August, citing the memory crunch ^[8]. It denied that memory costs played a role in the tablet pricing ^[26], though Panos Panay, Amazon's devices chief, said the shortage made a premium tablet at a reasonable price "quite tricky" to build ^[27]. "I think the team did a good job designing without making that trade," Panay told CNBC ^[28]. The second is that Amazon discounts the new models the way it discounted the Fire HD 10 ^[6], and the price a buyer pays drifts back down. The third is that the tablet is still a funnel, or more precisely a funnel with more places to pay.

I think the third fits the evidence best. Alexa+ on the tablets requires Prime or an Alexa+ subscription ^[13]. Turning off lockscreen ads costs $20, a third more than on Fire ^[14][25]. In the On-Screen Intelligence demo, Alexa watched a TikTok grilling clip and went shopping for the burger press in it ^[18]. "She'll do the homework, and if things work out, she's gonna bring up a shopping list where I can just hit buy now," Panay said ^[17]. CNA reported that Amazon has spent billions rebuilding Alexa with generative AI and that the service is unprofitable ^[19]. Every tablet that sells a Prime membership or an Alexa+ subscription helps pay that bill.

The counter-case is that the hardware now earns a margin of its own. Amazon did not disclose unit costs or margins, and with memory prices rising, the list price says little about either. The view is wrong if the tablets hold their list prices without Fire-style discounts while few buyers sign up for Alexa+.

Amazon is leaving the cheap end of a market that shrank 12% worldwide and 32% in the US in the second quarter ^[15]. In CNA's comparison its $550 top model matches Samsung's Galaxy tablet and costs more than a $450 iPad ^[7]. Apple and Samsung hold 34% and 17.5% of the market, by IDC's count ^[16]. Amazon said Fire owners can keep using their devices and that it will continue to support the line ^[2]. A spokesperson did not tell CNA whether Fire OS or its app store will be maintained, and earlier this year Amazon cut off support for older Kindles, citing software maintenance costs ^[9].