Amazon is reportedly increasing its orders for its Kindle Fire tablet to 5 million units following continued “strong” early demand for the 7-inch device. But could greater demand for the iPad rival actually backfire on the e-bookseller?

Citing anonymous “upstream component suppliers,” industry publication DigiTimes reports Amazon increased orders for the Fire “before the end of 2011.” The news of continued strong pre-orders seems to dovetail with our report that Amazon was averaging 50,000 sales per day. The $199 Kindle Fire officially goes on sales November 15.

This is the second time Amazon has told its suppliers to produce more of the tablets. In the middle of the third quarter, the company increased orders to 4 million units, up from 3.5 million. The Kindle Fire could rival early demand for Apple’s iPad 2. Leaked sales numbers suggest 250,000 of the Kindle tablets were pre-sold during the first five days, an amount that if continued could reach 2.5 million units already sold before the official launch next Tuesday. The demand would equal the 2.5 million iPad 2 tablets Apple sold during the first month, a level no Android-based alternative has been able to approach.

But such heavy demand for the Kindle Fire could come at a cost for Amazon. Each Kindle Fire could be sold for a $10 loss to the Seattle-based company, according to the MainStreet website. However, Amazon may be willing to eat the price in order to direct consumers its numerous cloud-based services tied to the tablet.

All of which comes down to another Apple advantage: it’s tightly-controlled supply lines. This factor could become the latest — and most difficult hurdle — for Android rivals to cross.