Amazon May Take Down Apple iPhone With Smartphone Release

Some said that while Amazon's new Kindle Fire tablet would make a dent in the tablet market it wouldn't be a direct competitor to Apple's industry-leading iPad tablet.

But they are wrong. Consider only that the new, low-priced Amazon Kindle Fire is the best selling tablet at Best Buy, according to the retailer's Web site -- besting the iPad.

Reviewers give the iPad higher marks than the give the Kinde, but in this dollar-challenged world, price matters. A lot. That's why the $199 Kindle Fire is beating the iPad, which starts in pricing at $499. That's why those who now argue that Amazon can't take down Apple's leading smartphone position with its popular iPhone with the release of its own smartphone are wrong.

Amazon loves selling low-priced product at a loss if it must to gain customers in mass in a hurry. Get big fast, that's Amazon's motto, and the company knows how to do it.

Recently, a top tech analyst predicted that Amazon is likely to release its own smartphone for under $200 next year. Citigroup analyst Mark Mahaney said in a research note that Amazon may sell the smartphone for as little as $170. Citing supply-chain channel checks in Asia, he said Amazon may release its first-ever smartphone by the fourth quarter of 2012.

For those keeping score, that's about the same time frame anticipated for the release of Apple's highly-awaited iPhone 5, said to be Steve Jobs' last big signature product. It will come with a bigger

If it's true, and indications and a wise hunch suggest they are, Amazon would compete with Apple and others in the smartphone realm using price as a major marketplace advantage. The company sells its Kindle Fire tablet at $199, for instance, far cheaper than the entry-level iPad, which begins at $499.

Amazon is also the global e-reader device leader with its Kindle.

With the clear success of the Kindle e-Reader over the past 3 years, and Kindle Fire possibly succeeding in the low-priced tablet market, we view this as the next logical step for Amazon, said Citigroup's Mahaney, in the research note.

The smarthphone would likely run on the Google's Android operating system, like the Kindle Fire tablet does. Mahaney said Amazon's smartphone would adopt a Texas Instruments processor and Qualcomm's baseband chips.

We expect Amazon's smartphone to be a mid-end device based on the processor it adopts, the brokerage said.

Mahaney expected Amazon's manufacturing costs for the smartphone for be between $150 and $170 each.

If the report is on target, Apple could be in trouble. Already, Apple's record-setting iPhone 4S is showing signs of slowing sales after breaking strong out of the gate. Amazon is expected to sell as many as five million Kindle Fire tablet devices in the fourth quarter of this year, after launching the product on Nov. 14, undoubtedly making a dent in Apple iPad sales growth.

There's no reason to believe that a smartphone from Amazon priced right wouldn't do the very same thing.