Amazon Is Reportedly Working On A Smartphone, But Cracking The Market Won’t Be Easy

Amazon’s Kindle Fire has done a remarkable job carving out its own niche in the tablet space, and it seems a sequel is already barreling down the pipeline for a release in the coming months. That new tablet may not be alone though, as rumblings of yet another Amazon hardware project have started up once again.

After conferring with their sources, Bloomberg reported late yesterday evening that Amazon is working on a new smartphone that they hope will go toe-to-toe with the iPhone and Android smartphones.

For those keeping tabs on rumors of Amazon’s potential forays into hardware, this doesn’t exactly come as a surprise — Citi analysts Mark Mahaney and Kevin Chang first pointed at the possibility of an Amazon smartphone after a series of supply chain checks with Chinese hardware manufacturers last year. What’s more, they also fingered Foxconn as one of Amazon’s conspirators in the project, a tidbit that Bloomberg’s sources confirm.

Sadly, the report is light on some of the juicier details — what OS it runs, how far along the project is, etc. — but there’s enough smoke here that it would be a surprise if there wasn’t any fire. Bloomberg’s report goes on to say that Amazon is bolstering its patent portfolio to give themselves some cover (sadly, this is a must for smartphone players), and Amazon’s acquisition of 3D mapping service UpNext suddenly makes a lot more sense.

That said, at this point Amazon’s potential smartphone play yields more questions than answers. There’s the issue of carrier support for one, something that Amazon luckily didn’t have to deal with when they launched the Kindle Fire.

Comparatively speaking, tablets are easy — slap a Wi-Fi radio in there and you’re off to the connectivity races. That approach obviously doesn’t cut it if Amazon plans on making a splash with a smartphone, and the company will need to link up with one (or more) wireless carriers in order to give their new device some legs. There’s also an argument to be made that carriers aren’t exactly fans of rocking the boat, and the prospect of selling a phone simply because it has Amazon’s name on it may not be the most comforting one to mull over.

Successful smartphones also require a hook — be it thoughtful design, a strong spec sheet, or forward-thinking features. Again, we don’t know what Amazon has planned on any of those fronts, but for their sake it had better be something good. What they almost certainly can’t do though is what they did with the Kindle Fire.

The Kindle Fire is a completely adequate device, but what really made it shine when it launched was its low price tag. Its sheen has begun to wane a bit since Google’s superior Nexus 7 was revealed at I/O, and Amazon is bound to face a similar situation if they branch out into the smartphone space.

Just being cheap isn’t good enough there — most smartphones are attached to multi-year contracts and have their price tags slashed as a result, so there’s literally no shortage of solid devices at nearly every price point. There is of course the possibility that Amazon will try something really novel like selling a super-cheap unlocked smartphone and let users choose their own GSM provider, but I suspect that’s a bit too off the beaten path for them.

Arguably, Amazon’s hook is their ecosystem. Easy access to Amazon’s vast stores of content combined with thoughtful integration of services like CloudDrive could make Amazon a real contender. Still, that won’t appeal to everyone, and it becomes a question of positioning at that point — serious workaholics and power users may want to find something different, but pitching the device as a one-stop shop to everything Amazon has to offer could be a boon for the all-important first time smartphone owner segment.

Much of the device’s potential appeal also rests on the operating system it runs on, and Android is a very likely choice considering their track record with the Kindle Fire. The question then becomes what will Amazon do to Android — the heavily tweaked fork seen on the Fire bears very little resemblance to the mobile OS that most of us know, and it’s not impossible to think that Amazon would do something similar for a new smartphone in an attempt to make it stand out among a sea of competitors.

All things considered, Amazon has a chance at successfully cracking the smartphone market, but they’ve got a long road ahead of them. Plenty of established players still have trouble crafting a formula to satisfy users, and Amazon has more than a little hubris going on if it thinks it can make a name for itself in this terribly competitive space. Then again, hubris is sometimes exactly what it takes pull something crazy off, so the rest of us will just have to wait and see what happens.