The Taiwanese electronics manufacturing company, Foxconn, known for manufacturing Apple's iDevices and Amazon's Kindle tablet, has allegedly started production on the purported Amazon smartphone which will make its appearance in mid-2013.

Taiwanese Web site China Economic News Service (CENS) reported that Amazon's smartphone will be priced between $100 and $200, presumably with a subsidy and contract from a wireless carrier.

Furthermore, CENS also reported that Amazon is also planning to launch another Kindle Fire during Q3 of next year.

"Apparently J Touch Corp and Young Fast Optoelectronics Co will be providing the displays for the smartphone, since both firms have close working ties with Foxconn, although that has not yet been confirmed," reported CENS.

The rumors of Amazon's smartphone have been surfacing for a while now which indicates that the smartphone will run on Android and is expected to have a display between 4-inch to 5-inch.

"Foxconn is expected to ship as many as five million units of the new device in the year, given the fact that Amazon has shown ambition to extend its business reach to the fast-growing market after succeeding in diversifying from e-books and readers to tablet PCs to drive its growth," reported CENS.

Amazon's low pricing strategy along with a loyal customer base and effective marketing strategies have rooted Amazon successfully in the tablet industry with its Kindle line-up of tablets. Similar planning from Amazon may see the e-retailer's smartphones carve a place for themselves in the consumer space.

The highly-competitive smartphone arena is dominated by big-wigs like Apple, Samsung, HTC, LG, et al. Amazon's entry in the smartphone market may make the competition even stiffer.

The 7-inch Kindle Fire HD tablet is currently priced at $199 so users will hope for a cheaper smartphone. It will be interesting to see if Amazon's low-price strategy works well in the smartphone industry.

Time will tell if Amazon will launch its alleged smartphone and if the handset can swivel its way in the smartphone space and makes a mark in the consumer market, just like the e-retailer's Kindle tablets.