Citigroup: Amazon to Challenge Apple's iPhone With New Device

Could Amazon launch a challenge to Apple's iPhone dominance in the smartphone business? Citigroup thinks so.

Based on our supply chain channel checks in Asia led by Kevin Chang, Citi's Taipei-based hardware research analyst, we believe an Amazon Smartphone will be launched in 4Q12, Citi analyst Mark Mahaney said in a research note, reported AllThingsD, a subsidiary of Dow Jones & Company.

Based on our supply chain check, we believe FIH (Foxcomm International Holdings) is now jointly developing the phone with Amazon, wrote Mahaney.

Citigroup believes the smartphone will use Texas Instrument's OMAP 4 processor and QCOM's dual mode 6-series standalone baseband. In all, the report said Amazon's phone may cost $150 to $170 for consumers, a bargain compared to a new iPhone.

This wouldn't be the first time the Seattle-based online retailer has gone head-to-head with Apple. Amazon just released the Kindle Fire , which came out this week, as it looks to take on Apple's iPad.

Jumping into the smartphone foray may not be easy for Amazon, as people have bought the iPhone in droves. The iPhone 4S has become a hot commodity, and over a million phones were pre-ordered on the first day they were available.