Rumors and speculation regarding a possible Amazon smartphone seem to be reaching critical mass. The latest version, however, involves another Seattle-area tech company as a potential manufacturing partner: HTC.

Both the Financial Times and Bloomberg are reporting that Amazon and HTC, which has its North American headquarters in Bellevue, are in talks about making Amazon-branded smartphones that would be tied to Amazon Prime content and services.

The F-T says HTC would produce as many as three smartphone models, while Bloomberg reports the two companies have been in discussions since early this summer.

Mobile analyst Michael Morgan with ABI Research tells KING 5 that given Amazon s success with tablets and e-readers, it shouldn t surprise tech observers that Jeff Bezos would want to try the smartphone market. But what advantages and challenges would Amazon face?

Considering that some retailers did not want to stock Amazon tablets, smartphones would create another distribution opportunity for Amazon looking to sell devices that would direct consumers to Amazon s web retail locations, Morgan said. With operators having a greater pull in smartphone distribution, they would be less afraid of having Amazon products on their shelves. Regular retail locations can be concerned that they are selling a device that would direct consumers to buy the items they offer online instead of in their stores. For operators who sell service, this is less of a concern.

Indeed, Target used to sell Amazon Kindle tablets until last year. Many pointed to Target s relationship with Apple as the reason why Amazon was shown the door.

Morgan also points to Amazon s successful use of the razors vs. razor blades strategy regarding devices and services.

The opportunity for Amazon is to have smartphones in the market that are tailored to leverage Amazon services. It has always been Amazon s model to forgo device margin and make their money on services. As such, these devices could have very attractive pricing, said Morgan.

HTC has a history of making well-regarded new devices that have the latest technology, yet play up another company s strengths. Morgan pointed to the this year s launch of HTC First, a smartphone that was really all about Facebook Home, the social network s suite of mobile apps.

Yet the HTC First hasn t broken any sales records. Another challenge for an Amazon-HTC device, Morgan said, would be the licensing reach of proprietary content and services.

If the device s value is tied to the content, then the device can only be sold in regions where the content is licensed, he said. In many cases, the content for Amazon does not have global reach or licensing. This means that the addressable market is limited.

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