Amazon is in fact testing smartphone plan
It looks like Amazon is indeed working on a "Kindle Phone."
According to the Wall Street Journal, component suppliers in Asia have begun to provide Amazon with the necessary components to build its own phone.
The Journal reports that it has heard from unnamed sources that the online retailer will potentially begin mass production of the device later this year.
Obviously, this is a direct result of the success of Amazon's Kindle Fire tablet, which managed to skyrocket ahead of dozens of other Android tablets.
The Kindle Fire has so many positive factors working in its favor. First, at $199, it's cheap. It blows other offerings like the Xoom and Galaxy Tab out of the water.
Second, "Kindle" is an immensely recognizable brand and carries a lot of weight throughout the industry - again, something that names like "Xoom" don't have.
And of course, because it's Amazon, the Kindle Fire gets free unlimited publicity on the world's largest online store.
It could bring a lot of those same factors to the table with a Kindle phone. The biggest issue with Android is fragmentation - you never know if an Android app will work on your particular phone. If there was a phone that was seen as "the" Android phone, though, it could be the model upon which all other Android handsets are built and help with that issue.
But this is all just hypothesis at this point. Amazon will be plenty busy with the Kindle Fire for some time to come.