This is according to a Friday report from former Wall Street Journal reporters Jessica E. Lessin and Amir Efrati, who quote people "familiar with Amazon's effort." The report comes only days before Apple is expected to announce a budget "iPhone 5C" on Tuesday, Sept. 10.
UPDATE: Two days after publishing her story, Lessin was told by an Amazon spokesperson that an Amazon-made phone was not coming this year, and if one was released in the future, it “would not be free.”
While Amazon's audacious but unconfirmed plan to offer a smartphone for free will likely pique the curiosity of many prospective buyers, questions linger. The phone's cost will be dependent on how the company works out its financial deals with hardware partners, Lessin and Efrati wrote, and some of their sources were less than convinced the free device strategy is even possible. To make up the cost, Amazon will reportedly depend on customers buying digital media and apps through services such as Amazon or Amazon Prime.
Still, Amazon's penchant for being a loss leader with its products -- such as selling $79 Kindles that cost $84 to build -- proves that if any company can pull this thing off, it may be Amazon. CNET pointed out that the phone, like the Kindle, could be a "classic Amazon move" to get customers pulled into the Amazon ecosystem of products.
As for hardware, the speculation is that similar to the Kindle, the Amazon smartphone would run on a "forked" version of Android. This means that the phone would run on an open-sourced version of Google's mobile operation system sans Google apps or the Google Play store. This would leave Amazon's phone in direct competition with other Google-approved Android phones.
The Wall Street Journal reported on Amazon's smartphone in May, saying the phone would possibly have a glasses-free 3D screen and eye tracking technology. The company could also offer a low-end version of the device, the WSJ also reported.