Why Amazon will launch a smartphone to take on Apple and Samsung

Market Realist

Amazon ups its hardware business with a smartphone and set-top box (Part 3 of 4)

(Continued from Part 2)

Amazon enters an already crowded smartphone market

Amazon (AMZN) is planning to enter the smartphone market, as a report in the Wall Street Journal, citing people briefed on the company’s plans, suggests. According to the report, Amazon aims to announce the launch of the smartphone by the end of June this year and begin shipping by the end of September, ahead of the holiday shopping season. The smartphone market is a competitive market led by Samsung (SSNLF) and Apple (AAPL), so Amazon will need to come up with a revolutionary product at an attractive price point to succeed in this market.

Amazon’s smartphone will have a screen capable of playing 3D images

As the above chart shows, Samsung has about 31% share in the worldwide smartphone market, with Apple at 15% market share, so these two players make up about half of the smartphone market. Huwaei, LG, and Lenovo (LNVGY) are other smaller players in this market with a share of 5% each. Samsung and Apple are established players in the smartphone market, so Amazon will need to outpace the innovation of these players with its smartphone. According to the report, Amazon will hope to distinguish its phone with a screen capable of playing three-dimensional images with special glasses. The phone would employ retina-tracking technology to make some images appear 3D.

Amazon’s business model focuses on services around a device

Amazon’s strategy has always been to offer hardware products at a lower price so as to acquire customers and then sell services to those customers. This is similar to what Google (GOOG) does by providing the smartphone operating system Android for free and then earning revenues from Google search ads on smartphones. In Amazon’s case, the company has a number of services to sell, such as Prime Instant Video service and other e-commerce products, including general merchandise, books, and music, on its site.

Continue to Part 4

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