A $99 Kindle Fire would annihilate the Android tablet competition

Rumors are abound that Amazon is working on bringing to market a 7-inch Kindle Fire HD tablet with a price tag of only $99. This would be the beginning of the end for the competition.

Currently, the 7-inch Kindle Fire HD costs $199, so the price drop would be a very significant one, taking it below the price point of $159 that Amazon currently asks for the older Kindle Fire tablet. Earlier this month, Amazon slashed the price of its 8.9-inch Kindle Fire, taking the wi-fi version down from $299 to $269, and the LTE version from $499 to $399.

Amazon is in a unique position to be able to bring cheap, yet high-quality tablets to market because it is not reliant on the hardware itself to turn a profit. The Kindle family of devices are a way of making existing Amazon customers buy more stuff.

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Why Amazon Kindle Fire HD will burn Google's Android tablet strategy

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According to an IHS iSuppli virtual teardown, the current 16GB 7-inch Kindle Fire HD is estimated to cost Amazon $174 to make, and this was based on November 2012 component costs. Most components have fallen in price during this time, so this will undoubtedly help bring the cost down.

Another factor that may help Amazon bring down the cost — in the short term, at any rate — is the fact that Texas Instruments, the company that manufactures the processor for the Kindle Fire, is looking to get out of the fabrication business. Speculation is that Amazon may have make a deal with TI to buy remaining stock of processors at a cut price.

Another possibility is that Amazon has approached another chipmaker — such as TSMC — to build processors for the Kindle Fire HD.

Another place that Amazon could shave a few dollars off the price of the Kindle Fire HD is with the display and touchscreen, which, based on the IHS numbers, represented the bulk of the component costs, totaling $64.

How disruptive would a $99 Android tablet be? Enormously so, and the biggest thing a mainstream name could do, short of going completely free — which might sound crazy, but could be doable under the right conditions.

Amazon has shown itself to be a company that's not afraid to experiment when it comes to hardware, and it has taken the Kindle brand and shaped it into a set of products that have had a profound impact on the e-reader and tablet markets, essentially shaping it from top to bottom. A $99 tablet would be the next step in that disruptive pattern.

The sub-$100 price point is a deep-rooted psychological one, and if Amazon can break it with the Kindle Fire HD, then not only is the retailer putting pressure on the likes of Apple and Samsung, but also on the myriad of low-quality cheap-and-nasty tablets flooding the market from China. $99 Android-powered tablets already exist, so the question is not whether Amazon can make a sub-$100 tablet — it can — but whether it can make a good one. Given the quality of current hardware, I would say that if Amazon does indeed come out with a $99 tablet, it will be a good product.

Or put it another way, it would have the biggest effect on the tablet market since Apple released the iPad.

UPDATE:

An Amazon spokesperson said in a statement that "it's not happening--we are already at the lowest price points possible for that hardware." What I find interesting about this statement is the reference to "that hardware," which I take to mean the current incarnation of the 7-inch Kindle Fire HD.