Amazon's senior vice president, overseeing the hardware division at the retailer, Dave Limp, was speaking at The Wall Street Journal D.Live technology conference this week, and made a rather bold statement. Limp envisions a day where Amazon is not making any hardware. That's pretty bold for someone that is in charge of the hardware department to say. But Limp is referring to Alexa hardware, not so much Kindle and Fire tablets. Limp believes that some day, all Alexa products will be third-party products. He thinks that would be a "fine outcome". Limp did mention that he doesn't believe that this would be happening anytime soon, especially where Alexa is still pretty young at this point – even though virtually everyone has an Alexa product in their home. All of Amazon's hardware have been pretty successful, so it would be a surprise for Amazon to stop making hardware, but it is still a pretty cool thing to talk about, for Limp.
This, of course, comes after Amazon announced a ton of new hardware products for Alexa, at its fall hardware event back in September. But the idea with those products is to be on the cutting edge of technology, and that is just what Amazon has done with these new products for Alexa. It is also building the platform, which is going to get third-party companies interested in building smart speakers that use Alexa, as opposed to Cortana, Siri or Google Assistant. And in fact, it has already gotten Facebook on-board with Portal. Which is similar to the Echo Show, but uses Facebook Messenger, and it has Amazon Alexa built-in. Limp has been with Amazon, and working on Kindle, Fire Tablet and its Echo Speaker lines sine around 2010. Before that, he was an executive at Palm and a venture partner at Azure Capital Partners, and before all of that, he spent around a decade at Apple. So he does definitely know what to do when it comes to hardware.
Background: For quite a few years, the only hardware that Amazon made was Kindles. That was so that its shoppers had a place that they could read the books they purchased from Amazon. After all, Amazon did start out as an online bookstore, that eventually morphed into the ecommerce retail giant that it is today. Then, when tablets started to become pretty popular, Amazon decided to make the Fire tablet, and competed with Barns & Noble, and well we know who won that competition. Amazon started with just one Fire tablet, and eventually came out with an entire line of Fire tablets, which are now some of the most popular tablets out there, primarily fort he price. Amazon then jumped into TV with Fire TV, which has also taken a pretty big chunk of the market. And now, it's focus is on Alexa with Echo products. Amazon has built a ton of different Echo products, from different size speakers, to smart displays, and everything in between. The ultimate goal there is to get Alexa into every home in the US and the handful of other countries that currently have Alexa support.
With Amazon's hardware, the main thing is to sell these products cheap. That is because they are all essentially windows into Amazon's website and online store, getting you to purchase even more from Amazon. While Amazon does have an ads business, it is not as robust as Google, where it is able to pay for services with those ads – but that might come down the road. Amazon has been selling Kindles, Fire tablets, Fire TVs and Echo devices at cost or even below cost. This means that they are often times undercutting their competition to get their devices into more hands. But it also gets more people sucked into that Amazon ecosystem, and that is where the money is. Amazon's hardware is more of a compliment to the other services that it provides right now, and not so much a revenue generator for them. Though these products do sell pretty well for Amazon, especially this time of year.
Impact: To have all Alexa devices made by third-parties, that isn't that much of a stretch, at least on the hardware front. There are already a ton of companies adding Alexa into their devices. Not just working with Alexa, but having Alexa built-in, like the ecobee4 which is a smart thermostat and works like an Echo smart speaker. Companies are out there making smart speakers with Alexa built-in as well. Like the Sonos One, which is perhaps the best sounding Alexa speaker out there right now. Then there is also a number of smart speakers from Anker that are competing and even undercutting, the Echo Dot. The issue, though, is going to be the software. Right now, a number of Alexa features are only available for first-party products like the Echo or Echo Show. While they are not available for something like the Ultimate Ears MEGABLAST or Sonos One, even though they are also Alexa speakers. So in order to get to a place where there are only third-party Alexa products, the software team will need to step up its game.
When it comes to the rest of Amazon's hardware – Kindle, Fire tablet, and Fire TV – they aren't really making a whole lot of changes to the hardware when it gets refreshed these days. Like the Fire TV Stick this year, got the biggest upgrade, which was adding 4K capability, for just $10 more. So it seems that Amazon has reached a ceiling here, when it comes to hardware. But a world where Amazon is no longer making hardware, would be an interesting one. But it won't be happening any time soon. Especially seeing how successful all of these product lines have been for Amazon in the past decade or so, not just in getting people to buy more from Amazon, but how well those products are selling for Amazon, particularly the Fire tablets, as they are now one of the largest tablet makers in the world.