Prototypes of the cylindrical speaker are wider than the current Echo to squeeze in additional components including at least four tweeters, said the people, who requested anonymity to discuss an internal matter.
The speaker is reportedly being developed to include improved audio to rival Apple's HomePod and other competing speakers on the market. According to Gurman, the Echo has lost some ground to more premium smart speakers that are marketed as offering superior sound.
The Echo, which went on sale in 2015, will grab 63% of the U.S. market this year, according to EMarketer. But it has lost some ground to the Sonos One, Apple Inc. HomePod and Google Home Max -- all of which claim to deliver superior audio. Google now has 31% of the market, while the rest have a combined 12%. The HomePod isn't selling as well as Apple expected, and the company recently dropped the price.
The development of a higher-quality Echo marks a new phase in Amazon's attempt to gain ground in the smart speaker segment. The company has previously introduced halfway-house solutions to improve the audio of the existing cylindrical Echo by offering a standalone subwoofer and connections to link the speakers to a hi-fi stereo system. The Echo range will also receive minor updates this fall, people familiar with the plans told Bloomberg.
Amazon also reportedly plans to launch a hi-fidelity version of its music streaming service by the end of the year.
In addition, Gurman's report includes details on Amazon's effort to ramp up work on its home robot, which has wheels and can be controlled by Alexa voice commands.
People familiar with the project have reportedly described prototypes that are about waist-high and navigate with the help of an array of computer-vision cameras, but it still isn't clear what purpose the robot would serve.
Amazon originally intended to reveal the robot, known internally as "Vesta," as early as this year, but the machine isn't quite ready for mass production, according to the report.