[JoelSutherland]

If this is true, I would wager it has the same specs as the current Nexus 7. The Tegra 3 that is currently used is printed on an out-dated 40nm process:

http://en.wikipedia.org/wiki/Tegra#Tegra_3

Printing the same chip on say a 32nm or 28nm process (Like the iPad 2,4) would dramatically reduce the cost.

This would also allow them to use a smaller battery and achieve the same battery life.

The major challenge is the LCD panel. It's plausible they could continue to use the same IPS screen, but using a nice TN screen is another place they could cut costs. They could also just wager that these are going to sell like crazy and work out a deal at volume like Apple does.