Following Amazon.com’s (AMZN) announcement today of new Kindle e-readers, and a new, 7-inch tablet, the “Kindle Fire,” a couple of analysts predict a 10-inch version will come next year, and that it might sport chips from Nvidia (NVDA), which has parts in other tablets, such as Motorola Mobility’s (MMI) “Xoom” tablet.It would appear the 7-inch version of Fire is based on a chip from Texas Instruments (TXN), not on Nvidia’s “Tegra” mobile processor.
As expected, Kindle Fire is based on a dual-core TI OMAP processor. Assuming volume of 5-10mn units and an ASP of $10-15 for OMAP, we estimate incremental revenue opportunity of roughly $100mn or less than 1% of TI’s sales. That said, the low price point and configuration could help establish Kindle Fire as a credible device at the low end of the Android tablet market. Furthermore, given strong momentum of the Apple iPad, this introduction could be perceived as potentially squeezing other Android tablets such as the Samsung Galaxy, Motorola Xoom, and RIM Playbook. We believe this scenario would be negative for Nvidia, which has a 70% share of the Android tablets, and is forecasting tablet revenue to almost double to $400-500mn in FY13 (Jan). That said, a larger form factor by Amazon could be introduced next year and may include an Nvidia Tegra processor.
We believe there will be a significant audience for the product as Amazon can essentially upsell its existing customer base into a richly featured color model in a 7 inch form factor that is familiar, albeit with a color screen and apps/media. We do believe; however, that Amazon will follow up the Kindle Fire early next year with a 10 inch offering, which we expect to be powered by Nvidia. It’s unclear whether or not the 7 inch Kindle Fire will utilize Nvidia, but we still believe it’s possible as it makes sense to us to utilize single chip architecture across the platform. If it’s not Nvidia, Texas Instruments is thought to be the chip of choice.
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