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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.

This isn't the Amazon Kindle smartphone. But will it look anything like this? David Carnoy/CNET)

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.

CNET answers your Kindle Fire questions

Analyst: Amazon to lose $50 on each Kindle Fire

Will Amazon produce a Kindle Phone?

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.

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