Amazon, the largest online store on the Internet, is dominating the market of electronic book readers and has strong chances to become a viable player on the market of media tablets. Why not try a luck in the world of smartphones? According to an analyst with Citigroup, Amazon is working on Kindle-branded smartphone to be launched in Q4 2012.

“We believe an Amazon Smartphone will be launched in Q4 2012. Based on our supply chain check, we believe FIH is now jointly developing the phone with Amazon. However, we believe that Amazon will pay NRE (non-recurring engineering fees) to FIH but the device and multiple components will actually be manufactured by Hon Hai’s TMS business group (the same business group that makes Amazon’s E-reader and the 8.9" Amazon tablet)," analyst Mark Mahaney wrote in a research note, reports AllThingsD.

^{Amazon Kindle Fire 7" tablet}

Smartphone will be a logical addition to Amazon's existing gadget lineup that includes a 7" tablet as well as a family of e-book readers. Since Amazon does not need to make money on the device itself and will likely impose rather strict limitations in order to enforce customers to buy content or programs only from Amazon and thus maximize the company's profits.

The launch timeframe and exact capabilities of the device will be determined considering the reception of Kindle Fire tablet. At present nothing particular, e.g., screen size, resolution and so on, is known about the advanced mobile phone from Amazon.

"We believe the smartphone will adopt Texas Instrument’s OMAP 4 processor and is very likely to adopt QCOM’s dual mode 6-series standalone baseband given QCOM has been a long-time baseband supplier for Amazon’s E-reader," said Mr. Mahaney.

While the viability of a smartphone for Amazon is clear, its success is not cast on stone to say at least. If Apple iPhone can be considered as a closed platform, then Amazon's Kindle is extremely closed and limited. Apple allows third-party content purchasing systems (including those from Amazon and B&N) to be installed onto iOS-based devices, Google allows multiple app stores, but Amazon wants to completely seal the Kindle platform and lock customers on its own services and app store despite of the fact that Fire tablet uses modified Android operating system. While such "absolutely sealed" approach may work on a tablet, it may not work on smartphone. For example, a smartphone without Skype can hardly be considered as a viable solution.

There are also ideological difference between tablet and smartphone designs. Kindle Fire tablet has a number of hardware limitations in order to save on bill-of-materials, e.g., lack of cameras. In case of smartphone, Amazon will not be able to save on certain hardware and will thus have to integrate all the components that the next-gen phones from Apple, Nokia or Samsung do. Only time will tell whether Amazon will be able to sell its smartphone at a low cost and hope that customers will compensate by acquiring content or software from the company.

Amazon did not comment on the news-story.

Tags: Amazon, Kindle, Fire, Kindle Fire, iPhone, iOS, Android, Google, Apple, Nokia