The original Fire Phone, launched in 2014 at $649, did not gain traction. Its features, including a 3D “Dynamic Perspective” display and a camera-based shopping tool called Firefly, failed to attract users.

Limited app availability on its proprietary Fire OS made matters worse. Amazon eventually cut the price to $159, discontinued the device after 14 months, and recorded a $170 million writedown for unsold inventory.

Per Reuters, the new phone, internally known as “Transformer,” is being built by Amazon’s devices unit. The project is led by ZeroOne, a group created last year to produce “breakthrough” gadgets.

ZeroOne is headed by J Allard, a former Microsoft executive involved in the Zune and Xbox. Panos Panay, head of Amazon’s devices and services unit, has been overseeing the company’s focus on toward more profitable hardware, including upcoming Android-based tablets.

Sources familiar with the project say the Transformer could serve as a personalised device connected to Amazon’s services. It may integrate Alexa and allow seamless access to Prime Video, Prime Music, and food delivery partners.

The phone is still in development. Amazon has considered both a full-featured smartphone and a “dumbphone” with limited functions to reduce screen time.

This comes as the global smartphone market faces several challenges. International Data Corporation expects shipments to fall sharply in 2026, with surging memory chip prices driving up costs.

Apple and Samsung are still leading, controlling roughly 40% of global sales last year. Analysts say new entrants will find it difficult to take market share.

The Transformer also joins a crowded field of AI-native devices. Previous attempts, such as the Humane AI Pin and Rabbit R1, embedded AI directly into hardware but failed after poor reviews and limited adoption.

OpenAI, meanwhile, is working with former Apple design chief Jony Ive on AI hardware prototypes expected no earlier than 2026.

Colin Sebastian, an analyst at R.W. Baird, said, “Amazon will have to give consumers a compelling reason to switch phones and people are pretty attached to the existing app stores.”

Amazon has not disclosed pricing or release plans for the Transformer. A company spokesperson declined to comment.

More than 200 people are said to be working on the project. The smart speaker will be the first device to launch and sources familiar with the plans say it is likely to cost between $200 and $300. However, it is not expected to ship before February 2027.

The speaker will reportedly include a camera which would allow the device to take in information about users and their surroundings. The report says the feature is designed to support more contextual responses and interactions.

Smart glasses are also in development, but mass production is unlikely before 2028. In addition, the company is said to be exploring a smart lamp and a wearable pin built for AI-powered interactions.

OpenAI did not immediately respond to a request for comment.

The company formally entered the hardware market in 2025 when it acquired io Products, a startup founded by former Apple designer Jony Ive, for $6.5 billion. Ive’s design studio is now working with OpenAI on the new devices.

This places OpenAI in competition with technology companies that are already developing or selling smart wearables.

Meta Platforms has recorded strong sales of its Ray-Ban smart glasses, which allow users to take photos, record video and stream content through built-in cameras. The glasses also support AI-driven features.

Apple is reportedly working on its own smart glasses while Google is still experimenting with augmented reality hardware after its earlier Google Glass project.

In building its own devices, OpenAI would better manage how users interact with its software. Instead of relying only on apps and partnerships, it could enhance the full experience, from hardware design to AI features.

However, devices built with cameras and sensors may attract regulatory review. Privacy issues are likely to surface, particularly in regions with strict data protection rules such as the European Union.

For now, the first expected product is the OpenAI smart speaker. If timelines are met, customers will not see it on shelves for at least another year.