Let the Kindle Phone Rumors Begin!

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Now that Amazon’s in the tablet business with the Kindle Fire, the rumor mill is starting to make noise about a Kindle Phone to follow.

In a research note, CitiGroup’s Mark Mahaney says “we believe an Amazon Smartphone will be launched in 4Q12,” based on “supply chain channel checks in Asia.” CitiGroup believes the Amazon smartphone will use a dual-core OMAP processor from Texas Instruments, and will cost between $150 and $170 to build. Amazon could sell the phone for something in that price range, or maybe less, Mahaney said, according to All Things Digital.

(MORE: Kindle Fire Reviews Run Hot and Cold)

Fair warning: “supply chain channel checks” from analysts are pretty much the bottom of the barrel for tech rumors, and we’re so far off from the fourth quarter of 2012 that a lot could change between now and then.

Still, CitiGroup’s Mahaney isn’t the only one with a Kindle Phone on the brain. Here’s TIME‘s own Harry McCracken, in a blog post earlier this week:

I wondered why no company has taken up the challenge of building…well, the iPhone of Android phones. Something that’s elegant, approachable, uncluttered, and respectful of the consumer’s intelligence. Any bundled services would need to be beautifully integrated rather than just shoveled onto the phone indiscriminately, as the apps on Android handsets often are.

And then it hit me: Why not Amazon?

Harry figured that Amazon’s already done a lot of the heavy lifting required to build a phone, having created the Kindle Fire based on a modified version of Android. Not to mention that Amazon already sells smartphones from other manufacturers on all four of the major U.S. wireless carriers. The retail structure for selling phones is already in place.

But building a phone isn’t as simple as building a tablet. A phone maker has to decide in advance which wireless frequencies to support. And in the United States, wireless carriers act as gatekeepers, deciding which phones to subsidize. (Most high-end phones actually cost around $600, but you get them for much less in exchange for signing a two-year contract.) If Amazon made a cheap enough phone, it could avoid the subsidy model, but that might strain the company’s relationship with wireless carriers, who certainly want to keep locking customers in with contracts.

Despite those complications, I still think a Kindle Phone is a natural progression for Amazon, with the goal of syncing your music, books, movies and apps across multiple devices. Shaky as this rumor is, it certainly won’t be the last.

MORE: Nook Tablet vs. Kindle Fire: A Guide to Decide