Google CEO Larry Page said:
"We're very excited about tablets. Obviously there's been a lot of success on some lower-price tablets that run Android, maybe not the full Google version of Android. But we definitely believe that there's going to be a lot of success at the lower end of the market as well with lower price products... It's definitely an area we think is important and we're quite focused on. "
When speaking of "not the full Google version of Android," Page is obviously speaking of the Kindle Fire, and to a lesser extent, Barnes and Noble's NOOK Color. Amazon.com has sold millions of Kindle Fires due to its low $199 price, but the device doesn't use a tablet-optimized version of Android, but a highly modified version of Gingerbread (Android 2.3), and as such doesn't even include Google Play as part of the platform.
The rumor is that Google is creating a Nexus tablet, once creating in concert with an OEM, believed to be Asus. It's also rumored that Google is trying to get the price of the tablet down as low as possibly $149, or at least $199, but with a full Android experience.
Google has to recognize that pricing is a big strength of Android, or at least, low pricing. Android controls more than two-thirds of the smartphone market in China, with much of the dominance based on low-priced handsets built by local device manufacturers such as ZTE and Huawei.
Still, this move might create (more) discord among Android manufacturers, but they haven't been able to make a major dent against the iPad, which has to be grating. A recent story suggested that if things continue the way they are, iPad may become genericized, sort of like "kleenex" or "aspirin."