Earlier this week, e-tail giant Amazon released its first tablet, the highly buzzy Kindle Fire. Now, Citigroup analyst Mark Mahaney says that a fully realized "Kindle Phone" — using Fire's tweaked Android operating system — could challenge Apple's iPhone as early as next year. "Based on our supply chain check, we believe FIH [Foxconn International Holdings; the company that manufactures the iPhone] is now jointly developing the phone with Amazon," Mahaney says. Is this rumored smartphone a logical next step for Amazon — or is the smartphone market already too crowded?

This makes a lot of sense: Why not, asks Harry McCracken at Technologizer. "Amazon is good at making things simple. Amazon has taste. Amazon has... movies, music, books, magazines, and apps" already available for purchase at the click of a button. A phone linked to your Amazon account would be a no-brainer, and the company's already done "a lot of the heavy lifting required to build a phone."
"Hey Amazon, how about a Kindle Fire phone?"

Amazon should stick with what it knows: Tablets and e-readers are "consumption-focused" devices, says Devindra Hardawar at VentureBeat. A phone — used mainly for communication, not media reading and watching — is a "big departure." Plus, the Kindle Fire's main draw is its affordable $200 price tag. There are already plenty of "cheap Android handsets on the market," so it seems like "Amazon has less to offer consumers" with a smartphone.
"Amazon rumored to be working on a phone — but is that wise?"

But in a way, this is what Amazon knows: Think about it, says Erick Schonfeld at TechCrunch. Just as Amazon did with the Fire, the company would likely subsidize much of the phone's cost and take a hit on each device sold. Why? Amazon's gadgets are merely a way to get consumers to buy content from the company's vast media archive. A smartphone would give Amazon yet another "delivery mechanism for ongoing subscription services." That's where the real profit is. CEO Jeff Bezos simply "doesn't care about making money on hardware." 
"What comes after the Kindle Fire? The Amazon smartphone"