According to a research report put out this morning by a couple of Citi analysts, Amazon appears to be developing a smartphone in collaboration with Foxconn, though the actual device will most like be manufactured by the same company that produces the Kindle line. The suggested chip under the hood of this device is said to be a TI OMAP4, with a Qualcomm dual mode 6-series standalone baseband handling the radio work.
The estimated cost for parts is roughly $150 to $170, which points towards a sub-$300 device, suggesting that this will be a mid-ranger when (if) it eventually hits the market. It's likely that Amazon may drop the price even lower, taking a bit of a hit on the hardware (much like with the Kindle Fire), as the company would make all of its money on the backend through digital content, subscription services, etc.
While there isn't much more info available at this time, the idea of an Amazon phone is definitely an intriguing one. Amazon Blaze, anyone?