New Freescale Chip Could Herald Cheaper Kindle

Freescale Semiconductor, an ARM licensee and the company responsible for the chips used in the majority of e-book readers, has developed some new silicon that it claims could help drive prices of the devices below $150 before the end of this year.

The i.MX508 applications processor, as Freescale has christened it, integrates an ARM Cortex-A8 processor core and E Ink’s hardware-based display controller into a system-on-a-chip that the company claims delivers twice the performance of its previous eReader chips (it runs at 800 megahertz). It also happens to be more energy-efficient and significantly cheaper.

According to Freescale marketing director Glen Burchers, the chip will cost less than $10 in volume quantities and will drop the unit price of e-readers that use it by at least $30.

“There’s a big unsaturated market out there, and price is a big factor,” Burchers told Bloomberg. “We do see the price of e-readers coming down this year, and Freescale is trying to facilitate that. That’s a lot of what this chip is doing.”

For Freescale customers like Amazon (AMZN), the i.MX508 couldn’t come at a better time. With Apple (AAPL) about to redefine consumer expectations for e-readers with its multipurpose iPad, Amazon will increasingly need to differentiate its single-purpose Kindle on price.

Dropping the retail price of the basic version of the device to around $150 from its current $259 would certainly do that. If that’s possible. Obviously, the cost of E-Ink displays and the Kindle’s other components need to come down as well.