Google prepping cheap 7-inch Android tablet to take on Kindle Fire: rumor

Android Ice Cream Sandwich Amazon Fire

Google is allegedly in the process of creating a 7-inch Android 4.0 (Ice Cream Sandwich) tablet that will be priced less than Amazon’s $200 Kindle Fire, reports DigitTimes. The device will purportedly arrive sometime in March or April. The news is extremely speculative, at this point, as Google Taiwan says that they have never heard of such plans.

Of course, a company feigning ignorance about an unannounced product is nothing knew — it happens constantly. But we’re going to only touch this one with a ten-foot pole, since there is so far no substantial evidence to corroborate the rumor.

That said, it makes sense that Google would want to get a piece of the low-end tablet bonanza, of which Amazon is currently the only real benefactor. In addition, we do know that Google has its own Android tablet in the works, based on comments by Google Chairman Eric Schmidt.

“In the next six months we plan to market a tablet of the highest quality,” Schmidt told reporters in Italy last month.

As TechCrunch columnist and venture capitalist MG Siegler points out, Schmidt’s statement and DigitTimes reports are partially at odds, as it would be impossible for Google to produce a ultra-cheap tablet that is also “of the highest quality” without losing money on the deal.

This strategy is not unheard of, however. In fact, Amazon itself loses about $2.70 on every Kindle Fire sold. The money lost in production of the Kindle Fire is presumably made up by the fact that the Kindle Fire is, more than anything, a digital storefront for Amazon, which means Kindle Fire owners are likely covering the $2.70 overage by buying other stuff through Amazon, or enrolling in Amazon Prime.

Seeing as Google is not an online retailer, but instead makes most of its money from Android by selling advertising, the economics of the situation become a bit more complicated for Google, or at least more of a gamble. But at this point, with Android tablets having so far failed to make any major dent in Apple’s iPad dominance, it might be time to start tossing the dice.

[Pictured: Amazon Kindle Fire running Android 4.0 (Ice Cream Sandwich)]