Anonymous sources in the Asus supply chain have, allegedly, reported that Google and Asus, following on the success of the Nexus 7, are preparing two new models: a $199 version supposed to be thinner and presumably different in some other ways, and more interestingly a $99 version.
It's easy to dismiss the latter rumor, especially since Asus as yet denies it (but then, they would do that even if it were true). It's also possible the rumors refer to a subsidized 3G version, although carriers seem to have largely lost interest in subsidizing tablets as few consumers have proven willing to pay for multiple data plans.
But what if the rumor is true, and refers to a new device, not to a subsidized 3G version of the Nexus 7? Is it even possible? Admittedly I am no expert in component costs, but I don't think it should be ruled out too quickly if, as rumors suggest, the goal is an entry-level tablet to undercut Amazon (and any hypothetical iPad Mini, which remains a rumor as well).
There are a few obvious ways they could get closer to such a price point: ditch the Tegra 3 for a dual core ARM processor, ditch the NFC altogether, maybe lose the gyroscope, possibly lose the GPS (I don't think Google will do that, though, because it seems integral to both their data collection efforts and the OS itself), possibly lose the Bluetooth (but I'm certain they wouldn't do that, even though the original Kindle Fire lacked Bluetooth support), etc...
A big chunk of the savings, though, could (and would probably have to) come from using more affordable displays, allegedly supplied by Hannstar. If these displays are at least as good, and possibly better, than the displays on the original Kindle Fire, it should be decent enough for a purely entry-level device.
Some would say, in fact some have said, that it would be impossible to build a good tablet at that price range. To be fair, many would have said the same thing about the Nexus 7's $200 price point and all it packs in. But perhaps we're thinking the wrong way about this, perhaps the term "tablet" isn't really the best to describe this hypothetical device. Perhaps a better term would be Portable Media Device. Some argued that the original Kindle Fire wasn't a tablet, but a media device having some features of a tablet like a touchscreen and apps.
Maybe, probably, this is what Google would be aiming for: a device you can watch videos on, read books and magazines on, listen to music on, and oh by the way it also does apps and can browse the web decently. And by sacrificing some of the Nexus 7's under-the-hood power, it might even manage to squeeze out a few extra hours of battery life.
If Google can manage an experience for $99 that at least compares with the nearly-twice-as-expensive Kindle Fire 2, it would be game changing for the low end of the market. $99 is a magic price point, at least in the United States, and it's at least a very good price in almost any market. If the Nexus 7 is expected to sell as many as 6-8mn or more units by the end of 2012, a $99 Asus Nexus tablet could sell up to twice as many or more, and even if it sold only a few million that would still be great for Google and Asus.
And I'm sure Google would sweeten the pot. They would probably offer a Play Store credit, perhaps $10-15 (probably not $25 like the N7, though, given the price difference), and would certainly bundle a free movie, a free book, some free magazines, and some free songs, the goal being to get you started investing in all aspects of their content ecosystem.
Even if Google and Asus could manage a $150 price point with a quality content consumption tablet, it would still undercut the cost of Amazon's Fire series and have the potential to sell like hotcakes, especially in developing markets.
For now you probably shouldn't hold your breath, this could all turn out to be baseless rumor, or a misinterpretation, but it's not outside the realm of possibility. Amazon has proven that you can sell millions of units of an extremely basic tablet fit largely for content consumption if the experience is at least decent and if it's marketed well.
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