New York Post, a newspaper known more for gossips than tech news is reporting that Amazon will enter the tablet market in October with a lower priced tablet to compete with Apple’s iPad. Garett Sloane wrote:

Amazon is poised to enter the tablet fray with an Android-powered tablet in late September or October, a source with knowledge of the plans said yesterday.

The device will sell for hundreds less than the entry-point $499 iPad, a feat few tablet makers have accomplished, the source said.

Amazon is considered one of the few credible threats to Apple and has been willing to sell its electronics at a loss in hopes of generating more digital media purchases.

There is no information available about specifications of the tablet, but we think if Amazon wants to manufacture/sell a tablet (for $99 or $199) that is cheaper than iPad they will have to compromise on quality. Because recovering $300 via digital media purchases after selling a tablet on loss is next to impossible. Average consumers spends around $10-20 per month on online content, which would mean that it could take Amazon about 20-30 months to recover cost and make some profit on each tablet.

Many teardowns and cost analysis have already shown that if you are building a tablet that has iPad like performance and built quality you can’t compete with Apple on price, as cost of materials alone can reach about $300. What Amazon can do is use lower quality LCD screen, cheaper casing, slower ARM single core processor and less flash memory to bring the cost down and sell the Kindle tablet for about $299. The only problem with this approach will be that anyone who has seen an iPad will know the difference.