City investors suggest that Amazon's foray into Android tablets with the Kindle Fire could be followed up by a new smartphone in 2012.

A Fire in Your Pocket?

Amazon must be smelling the success from the Kindle Fire, even though most of the new Android-powered tablets are barely out of their shrink wrap. Word from investors is that the company is signing up with Chinese phone making giant Foxconn to produce and release a Kindle smartphone in late 2012.

We can likely expect the same low-cost approach, with a decent screen in front of medium-spec hardware, although Amazon will have hopefully refined its interface based on much early criticism. That means limited memory and processing power but with deep ties into Amazon's ecosystem for purchases and long-term revenue.

UPDATE: While the smartphone addition to the Kindle family might be on the horizon, first up for Amazon will be a bigger Kindle tablet with an 8.9" screened edition due around Spring 2012. There is also word of a 10.1" screen edition, giving a full range across the spectrum of tablets and begging for a little smartphone brother to round things off.

Room For One More?

With endless cheap Android phones already on the market, there is a great deal more at risk for Amazon entering this arena. But, it has a vast global customer base, who may have avoided much of the smartphone hoopla up to now, to rely on for sales.

Even so, with Apple expected to release the iPhone 5 sometime in 2012 and herds of Windows 8 devices likely, plus most consumers now nicely settled into their chosen operating system, picking up sales due to churn and system switching might be somewhat limited when the Kindle phone does launch.

Amazon also risks low sales as much of its content; books, magazines and movies will look less impressive on a small screen, no matter how good. However, various financial analysts are betting this will happen, and there has to be more upside for Amazon than down in its long-term store sales.