Reactions to Amazon's Kindle Fire tablet - an iPad rival capable of playing video, television and music - have been mixed.
The secret weapon of the gadget - only available in the U.S. - is easy and instant access to Amazon's huge library of entertainment.
Among the early reviews, the pithiest comment was Wired magazine's: 'The Fire is a fiendishly effective shopping portal in the guise of a 7-inch slate.'
Amazon is reportedly losing a small amount - $3 - per Fire tablet it sells. But the fact the tablets are intended to sell entertainment means that it should more than make up for this early loss when users buy, rent and enjoy films and music.
Now analysis of Amazon's supply chain in the Far East has revealed that the 7in tablet may just be the beginning of an assault on the touchscreen entertainment monopoly that Apple has built over the past decade.
A smartphone - similar to Apple's iPhone, but considerably cheaper - could be on sale by late next year.
Analysts Citigroup said, 'We view this as the logical next step for Amazon.'
Reports have suggested it will have a 4in screen (bigger than iPhone's) and an eight megapixel camera.
Citigroup said it believes the online retail giant is now jointly developing the phone with Foxconn International Holdings, the world’s top contract cellphone maker, which has made many of Apple's most successful products.
'With the clear success of the Kindle e-Reader over the past three years, and Kindle Fire possibly succeeding in the low-priced tablet market, we view this as the next logical step for Amazon,’ says Citigroup.
It expects Taiwan’s Hon Hai Precision Industry Co Ltd - another supplier of hi-tech components for Apple's products - to actually make the device and multiple components.
It's widely expected that Amazon will sell the phone at or around cost price - allowing it, once again, to severely undercut Apple's smartphone.
The company’s recently launched Kindle Fire tablet device using components from Texas Instruments, Samsung Electronics, LG Electronics and Hynix Semiconductor.
'We continue to believe Amazon has now set its eyes on the Mobile (and tablet) Media and Product consumption frontier,' said Citigroup.