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Whether Amazon’ s Kindle Fire proves to be the iPad challenger expected by pundits and analysts, the next version of the tablet may already be in development: According to the Taiwanese publication DigiTimes, the online retailer is working on 8.9- and 10.1-inch models.

Amazon is developing 8.9- and 10.1-inch next-generation Kindle Fire models, and has selected an 8.9-inch model for launch by the end of the second quarter of 2012, read the Nov. 21 DigiTimes piece, which cited unnamed sources. It also suggested that Foxconn had become a second original design manufacturer (ODM) of 7-inch Kindle Fire next to Quanta Computer.

The Kindle Fire is not a tablet in the mode of Apple s iPad or Samsung s Galaxy Tab, whose user interfaces center on grid-like screens of individual applications. Amazon s stated goal has been to build a device that seamlessly connects with its voluminous stores of streaming video content, e-books and music. To that end, the Kindle Fire’ s user interface consists of a set of virtual shelves lined with the user’ s media and applications, as well as touchable links to Amazon’ s storefront. In many ways, that makes it more of a vending machine for streaming media than a full-fledged tablet.

As a piece of hardware, the current 7-inch Kindle Fire costs $201.70 to manufacture, according to a recent preliminary finding by IHS Teardown Analysis Service. Given the Fire ‘s price point of $199 (if that analysis proves correct), then Amazon sells each unit at a slight but noticeable loss.

Amazon makes its money not on Kindle hardware, but on the paid content and other products it plans to sell the consumer through the Kindle, Andrew Rassweiler, senior director of IHS teardown services, wrote in a Nov. 18 research note.

This is a similar business model to wireless companies such as ATT or Verizon, he added. They sell you a phone that costs them $400 to $600 or more to make for a price of only $200. However, they expect to more than make up for that loss with a two-year service contract.

The screen is one of the most expensive components of the current Kindle Fire, costing an IHS-estimated $87, or 46.9 percent of its total bill of materials. If Amazon decides to build future Kindle Fire devices with larger screens and upgraded hardware, it could cost the company quite a bit more but then, the retailer would probably set a price for those tablets above its current level.

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To read the original eWeek article, click here: Amazon Kindle Fire 8.9-, 10.1-Inch Versions in Development: Report