Kindle smartphone? Report says one's on the way

The Kindle Fire tablet has only been available for a few days, but already Amazon is looking to launch a smartphone, a new report claims.

According to an investor note from Citigroup analyst Kevin Chang and obtained by All Things Digital, Amazon is currently working with well-known manufacturer Foxconn to develop a smartphone slated to be released in the fourth quarter of 2012.

So far, Chang doesn't know what the smartphone will look like, but he believes that it will use Texas Instrument's OMAP 4 processor. Amazon's Kindle Fire is also running an OMAP processor.

Chang believes the smartphone will cost Amazon between $150 and $170 to build. However, he said, rather than sell the device with a 30 percent gross margin, like many handset makers do, including HTC, he believes the e-commerce giant could sell the device at or near its cost.

Such a strategy wouldn't be unprecedented. In September, Piper Jaffray analyst Gene Munster said that he believes Amazon pays $250 to produce its Kindle Fire. The 7-inch, Android-based tablet is available for $199.

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Chang isn't the only person who thinks an Amazon smartphone could eventually launch. Last month, CNET executive editor David Carnoy argued that it's not a matter of if Amazon will launch a smartphone, but when.

"Of course, any time you get cellular technology and carriers involved, things get much more complicated," Carnoy wrote in a column on CNET last month. "But I think it's only a matter of time before you see a Kindle smartphone; ultimately, Jeff Bezos knows that his company is going to have to compete directly against the iPhone if he wants Amazon to be Apple--or even beat it."

Amazon did not immediately respond to CNET's request for comment on Chang's report.