Report: Amazon plans iPhone rival

Amazon may be piling its chips on the table in a bet on smartphones.

A smartphone from Amazon "may be coming next holiday season," noted Citigroup Global Markets analyst Mark Mahaney.

Such a hand in the smartphone market could better position it against Apple and Google for digital media sales as it strives to become an all-encompassing retail powerhouse.

Amazon's entry is uncertain, but the device is expected to be manufactured at the same location -- Hon Hai's TMS business group -- where its Kindle e-reader and Fire tablet are made, the analyst reports.

Citigroup says a smartphone is the next logical step for Amazon to follow up its popular Kindle e-reader and new Kindle Fire.

"We continue to believe Amazon has now set its eyes on the mobile (and tablet) media and product consumption frontier," Mahaney noted. The firm expects an Amazon smartphone to emerge around the fourth quarter of 2012.

Google Music's launch Wednesday turned up the heat against Amazon's digital music sales. The shot for a piece of the market dominated by Apple's iTunes underscores the three-way race.