Report: Amazon's $359 Kindle 2 costs $185 to make

It broke down the device's components and determined that the gadget costs about $185 in parts and manufacturing, or about 52 percent of the total price.

ISuppli estimated that the cost of parts to build the Kindle 2 totals $176.83, with $60 going toward an E-Ink Corp. display and $39.50 toward a module from Novatel Wireless Inc. to permit wireless downloads over Sprint Nextel Corp.'s EV-DO data network.

ISuppli believes that, when including manufacturing and battery costs, the device costs $185.49 to build.

By comparison, iSuppli estimates that Apple Inc.'s iPhone 3G costs $174.33 to build. The product sells for $599 or $699, depending on its storage capacity, when purchased from wireless carrier AT&T Inc. without a service contract. They cost $199 or $299 when purchased with a two-year contract.

Amazon, which began selling the Kindle in late 2007, started shipping the second version of the device in February. The Kindle 2 includes numerous upgrades, such as a skinnier body, the ability to store more books and a screen that can display 16 shades of gray, compared with four shades on the first Kindle.

Amazon has not released Kindle sales figures, but Citi Investment Research analyst Mark Mahaney has estimated that the company sold 500,000 of them in 2008.

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