How Amazon plans to beat Apple at AI devices

Amazon’s device division is charting a new course under Panos Panay, who joined the company from Microsoft in 2023, with plans to create gadgets people actually want displayed in their homes while turning the long-struggling unit into a money-maker.

When Panay first arrived at Amazon, employees expected him to push the company’s gadgets toward the luxury market. Instead, he told thousands of workers from the Alexa, Echo and Fire TV teams during a company meeting that his approach would be different. This week’s product launch in New York made his strategy clear: build quality devices across all price points.

The new lineup includes updated smart speakers, e-book readers, home security products, TV accessories, and other items. While many carry higher prices, Panay stressed that affordable options remain just as important.

“The superpower of designing for cost is such a rare talent,” he said, as mentioned in a Bloomberg report. “When you just anchor on that and now you’re making great products and you can serve everyone, that’s how we can have impact on the world.”

Design philosophy focuses on blending in, not standing out

Ralf Groene, Amazon’s design head who previously worked at Microsoft and came out of retirement this year, shares that thinking. “There’s lots of sophistication in the material, but we don’t want you to be like, ‘Oh, it’s so sophisticated.’ It needs to blend in,” he said.

Panay’s favorite among the new releases is a $40 4K Fire TV stick. The device features a new operating system with better speed and performance.

However, creating higher-end products is equally central to the vision. The device unit has traditionally been seen as a money-losing operation, with the real earnings generated through subscriptions and Alexa-driven purchases. Panay disputes that view. Although the division continues to operate at a loss overall, certain product categories are now making money and others are heading toward profitability, he said.

The updated devices reflect this dual approach. The latest Echo Show 8 costs $80 more than the current version. The new color Kindle Scribe is about $200 more expensive than any previous Amazon e-reader. “With those higher prices, you’re also getting a much better product,” Panay said.

Alexa+ takes center stage in product strategy

Panay’s team meets every Thursday for planning sessions and has mapped out products for the next three years. A major piece is Alexa+, the AI-powered voice assistant that launched in March. It costs $20 per month or comes free with Prime membership. Amazon now has double-digit millions of users on the new system.

“Great products made even better through ambient AI,” Panay said, describing the strategy.

The rollout hasn’t been perfect. Users have reported slow deployment, broken connections with some appliances, and the system misunderstanding commands. “This is not an easy transition,” Panay acknowledged.

The new Echo Show uses AI with sensors to recognize who approaches and immediately shows that person’s preferences and content. The Kindle can upload notes to help answer Alexa queries on speakers.

Daniel Rausch, who runs Alexa and Echo under Panay, said the new interface gets two to three times more usage than the old Alexa among those who have it.

Looking ahead, Panay wants devices that work in the background and reduce screen time. The real challenge is mobile devices. Amazon’s Fire Phone failed a decade ago. The company is developing earbuds and smart glasses with Alexa, but needs something portable built around AI.

In August, Amazon bought Bee, a startup that made a wristband that records a person’s day and sends summaries to a phone app. Amazon plans to update it and connect it to Alexa+.

Panay has brought former Microsoft colleagues, including Aidan Marcuss, who now runs Amazon’s TV business, and J Allard, Xbox co-inventor, who leads work on new form factors. Jamie Siminoff, Ring’s creator, returned this year.

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