Amazon took a $170 million hit on unsold Fire Phone inventory when that experiment tanked in 2015. That fiasco cost the company real money, real talent, and real credibility in hardware. Now the company is reportedly gearing up to do it all again. This time the market is even worse.
Amazon is developing a new smartphone known internally as "Transformer" that would sync across other Alexa smart devices while also putting Amazon shopping at the center of the experience, according to reporting by Reuters. Project leadership falls under ZeroOne, an Amazon devices unit headed by J Allard, Vice President of ZeroOne and former Microsoft executive, who previously co-founded Xbox and helped create the Zune music player. The smartphone project is still in development and could be shelved at any point.
There's a reason to be sceptical. Francisco Jeronimo, vice president of client devices with IDC, says "Amazon is unlikely to build a better smartphone than Apple, Samsung, or leading Chinese OEMs" and notes that "the smartphone market is expected to contract 13% in 2026 due to the memory shortage crisis, making it the worst possible time to launch a new device." In real terms, this means the global smartphone market will contract 12.9% in 2026 because of the unprecedented memory chip shortage, marking what may be the industry's worst year in more than a decade. Smartphone makers are struggling to secure memory chips as the voracious demand for HBM by hyperscalers, such as Microsoft, Google, Meta and Amazon, has forced the three biggest memory manufacturers to pivot their limited cleanroom space and capital expenditure towards higher margin enterprise-grade components. That means fewer chips available for phones at higher prices. A new entrant walks into that supply crunch with zero negotiating leverage.
Apple and Samsung together command about 40 percent of global smartphone sales, while overall shipments are projected to decline approximately 13 percent in 2026 due partly to rising memory chip costs driving up device prices. Breaking into this duopoly has never been easy, but at least when the market was growing. Now Amazon would be launching into a contracting market where even incumbents are under pressure.
The Fire Phone's core failure wasn't just bad execution or poor timing. Amazon's devices run on Android, but use a proprietary app store tailor-made for the company's phones and tablets, meaning developers have to make different versions of their apps specifically for the Fire Phone. Amazon's app store had about 240,000 apps, compared to more than 1 million in the Google Play store, and lacked Google's flagship apps like Gmail, YouTube and Google Maps. The fundamental problem was ecosystem lock-in that made the phone less useful, not more. Colin Sebastian, senior research analyst at Baird Equity Research, said "Amazon will have to give consumers a compelling reason to switch phones and people are pretty attached to the existing app stores."
There is one plausible path forward, though it requires Amazon to think differently. According to IDC analysts, one area where the phone could succeed is as an AI device, with the competitive battleground moving away from hardware toward ecosystems, AI capabilities, and service integration. Amazon could have an opportunity by bringing together a powerful services ecosystem spanning commerce, content, cloud, and an existing AI foundation with Alexa, along with deep expertise in data-driven customer engagement. But this assumes Amazon can execute where it failed before. Jeronimo warned that "these are viable niches for small players, but not for a company of Amazon's scale and expectations" and that "Amazon cannot justify entering a market for tens of thousands of units when its business model requires a significantly larger impact."
Amazon also plans to explore a "dumbphone" variant with fewer features, drawing inspiration from the Light Phone, a minimalist handset offering only basic functions such as a camera, maps and a calendar, without an app store or web browser. A feature phone version could also be positioned as a secondary device to complement primary smartphones, with devices in this category accounting for around 15% of global handset sales in 2025. But niche markets are niche for a reason. These are viable niches for small players, but not for a company of Amazon's scale and expectations.
The central tension is real. Amazon has the ecosystem that theoretically makes a phone defensible: Prime, Alexa, content, cloud services, and deep retail relationships. But it didn't matter in 2014. It remains unclear what has fundamentally changed about consumer attachment to existing ecosystems or the barriers to entry. There is no price or timeframe for when the phone might be released, and Amazon has had no comment on the project.