How Amazon’s smartphone comeback shows Big Tech still believes AI can reboot old failures

More than a decade after the Fire Phone crashed and burned, Amazon is reportedly trying again with a new handset code-named “Transformer.” The project is still early and could be scrapped, but the mere fact that it exists says something important about the current business moment: in the age of AI, yesterday’s flop can suddenly look like tomorrow’s platform.

In 2014, Amazon launched the Fire Phone as a direct challenge to Apple and Samsung. It lasted barely 14 months. The device was hurt by weak app support, an awkward 3D interface, overheating problems, and a price that quickly collapsed from $649 unlocked to $159. Amazon ultimately took a $170 million charge for unsold inventory, turning the Fire Phone into one of the company’s most memorable hardware misfires.

Now Amazon is reportedly back in the lab. Reuters says the new effort, internally called Transformer, is being developed inside Amazon’s devices and services unit and is meant to act as a mobile personalization device tightly linked to Alexa and Amazon’s wider ecosystem, including shopping, Prime Video, Prime Music, and food ordering through partners like Grubhub. The project is being led by ZeroOne, a year-old group inside Amazon’s devices business that was created to build “breakthrough” gadgets and is run by former Microsoft executive J Allard.

The business logic is much stronger this time, at least on paper. In 2014, Amazon was trying to wedge a shopping-centric phone into a market already ruled by app stores and established handset brands. In 2026, it can make a different pitch: a phone that serves as an AI-native front door to Amazon’s services, one that could reduce reliance on traditional app stores and make Alexa more central to daily life. Reuters reports that AI integration is a key focus of the project and that Alexa would likely be a core feature, even if it is not the phone’s primary operating system.

That does not mean the odds are friendly. Reuters notes that Amazon has not yet lined up wireless carrier partners, that the project’s timeline is unclear, and that the device could still be abandoned if strategy or finances change. The company has also explored both a conventional smartphone and a more limited “dumbphone”-style device inspired in part by the Light Phone, a sign that even inside Amazon the product thesis may still be in flux. When a company is testing both a full-featured smartphone and a minimalist second device, it usually means the strategy is still looking for its sharpest shape.

The competitive backdrop is also harsher than it was the first time around. Apple and Samsung together controlled about 40% of global smartphone sales last year, according to Counterpoint Research as cited by Reuters, while IDC expects smartphone shipments to suffer their biggest decline ever in 2026, falling 13% as memory-chip prices drive up device costs. That is a rough market in which to attempt a comeback, especially for a company whose last phone became a corporate cautionary tale.

Still, Amazon clearly sees a strategic opening. Reuters reports that the company’s devices chief Panos Panay has been trying to reverse years of unprofitability in the division, while Alexa’s multi-year AI overhaul has made the assistant more important to Amazon’s consumer strategy. In that light, the new phone is less about beating the iPhone on hardware elegance and more about giving Amazon another shot at owning a layer of everyday computing it has never fully controlled. A smartphone, even in a shrinking market, remains one of the most valuable pieces of consumer real estate on earth.

That is what makes this story bigger than gadget gossip. Amazon is not revisiting phones because nostalgia struck. It is revisiting them because AI has scrambled the old map of devices and interfaces. If software agents become more useful, and if consumers start caring less about app grids and more about personalized assistance, then a company with Amazon’s commerce, cloud, media, and voice assets can convince itself that the board has been reset. The Fire Phone once looked like a bad idea in search of a market. Transformer looks like Amazon betting that AI might finally create the market the company wanted all along.