Is Amazon Ready to CHALLENGE the Apple iPhone?

The mobile wars continue to heat up. Amazon.com Inc. (NASDAQ:AMZN) is reportedly developing a smartphone to compete with Apple Inc. (NASDAQ:AAPL)’s iPhone and devices that run Google Inc. (NASDAQ:GOOG)’s Android operating system.

Bloomberg reports, “Foxconn International Holdings Ltd., the Chinese mobile-phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said.”

This is hardly the first time that Amazon (NASDAQ:AMZN) would be stepping outside of its comfort zone. Last year, the world’s largest online retailer introduced the Kindle Fire, a 7-inch tablet. It was the first tablet PC from Amazon and a direct attempt to capture a piece of the Apple (NASDAQ:AAPL) dominated market. Since launching, the Kindle Fire’s share of Android operated devices  has surged and is the best selling item on Amazon.com.

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Much like the tablet market, Amazon has its work cut out for itself. In the first-quarter of 2012, Samsung sold a whopping 42.2 million smartphones, representing a new record. Meanwhile, Apple sold a total of 35.1 million units during the same period. Other companies such as Nokia (NYSE:NOK) and Research in Motion (NASDAQ:RIMM) are quickly becoming non-existent in the smartphone market. In the first-quarter, Nokia sold 11.9 million units, a near 51 percent drop from last year. Meanwhile, RIM saw its unit sales decline by 29.7 percent to 9.7 million. If Amazon can capture enough interest with a well-priced innovative smartphone, it stands to make a decent run for the number three spot, behind Samsung and Apple (NASDAQ:AAPL).

According to International Data Corporation, a market research and analysis firm specializing in information technology, the worldwide smartphone market grew 42.5 percent year-over-year during the first-quarter. Almost 145 million smartphones were shipped during the first three months of the year.

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