Amazon Is Building A Hardware And Services Empire

It’s incredible to reflect on Amazon’s history as a once strictly online retailer, and think one day they would get into the web services business. It was ten years ago in 2002 when Amazon Web Services was launched — that’s certainly quite a long time in Internet years. It wasn’t until 2006 though when the company started to really get serious with web services. That was the year they launched Simple Queue Service (SQS), Simple Storage Service (S3), and Elastic Compute Cloud (EC2). In just six years, S3 and EC2 went from budding cloud based services to being the backbone for how thousands of companies chose to operate their critical web applications. Even today in 2012, Amazon continues to innovate and expand their services portfolio with productions like Route 53, online payments, and Glacier — a very low cost storage solution running off of S3. I could go on and on, but you would probably get tired of hearing me list all of the services Amazon has managed to get their hands into lately.

The last couple of years have been particularly interesting. The company has managed to move beyond just physical goods, and get very serious with digital movie, music, and book distribution. Amazon does so incredibly well at selling digital books, that they decided to get into the hardware business and build their own line of ebook readers. There’s no way denying that Amazon is undoubtedly successful in the ebook reader business. Since the Kindle’s inception, they have continued to iterate and refine the product, year-after-year. They have also significantly managed to bring down its price to levels where you don’t even have to think to buy one (just $89 for the base model). Amazon now loses money on their Kindle business, but they make up for it in spades with the sales of their digital content. They know full well that the Kindle, as a device, is absolutely useless unless you buy content from their store. With this kind of consumer lock-in, the company can continue to churn out new Kindles at lower price points — therefore bringing on even more new customers, which ends up leading to more content sales.

Amazon is now firmly planted in the hardware business. They have a large enough portfolio of Kindle ebook readers, spanning from basic e-ink models to colour tablet versions like the Kindle Fire. It would be foolish to think that the company isn’t getting exponentially better at building and selling these devices. So where does this take them next? There have been rumours and rampant speculation that the next step for them is to get into the smartphone game. I honestly have no information to back any of those stories that have been made. Would I be surprised if they did build a smartphone? No, not really.

Speaking of building smartphones, Robin Wauters reporting for The Next Web shares something rather interesting:

Texas Instruments (TI), which recently announced that it will wind down its operations in smartphone and tablet oriented OMAP chips and instead focus on embedded platforms, is engaged in ‘advanced negotiations’ to sell that particular line of business to one of its largest customers:

If this is true, and even if Amazon does actually end up acquiring this part of Texas Instruments’s business, it doesn’t necessarily mean they plan on building a smartphone — at least not for now. Owning a chip manufacturer would bring many benefits for Amazon: namely tight control over the design and manufacturing of the chips that end up in their own devices. Does this sound familiar? Apple did this very same thing with the design of the new A6 chip that ended up in the iPhone 5. They weren’t happy with someone else just being a partner — they wanted completely end-to-end control. Whatever happens with Amazon’s continued foray into the ebook and tablet business, the company is only going to continue to build and build into a much larger competitor for Apple than any one Android OEM could ever be.