The 7-inch and 8-inch tablet market continues to heat up with plenty of new players joining all the time. Amazon might be one of the leaders in the cheap tablet space, but they need to do something big if they want to keep it that way. If a new rumor is to be believed, that ‘something big’ is a $99 Kindle Fire HD.

At $99, the Kindle Fire HD is said to come equipped with a 1280 x 800 resolution display, just like the current 7-inch Kindle Fire HD. As for the processor, Amazon supposedly will continue using chips from Texas Instruments. Beyond that, it isn’t clear how Amazon will adjust the specs to reach such a low price tag.

It might seem a little odd that Amazon is still planning on going with TI, considering Texas Instruments has essentially moved away from the mobile chip business. The idea, as suggested by IDC Research Director Tom Mainelli, is that Amazon might be cutting a deal with TI to buy up remaining stock from TI on the cheap.

Keep in mind that this is all rumor and speculation at this stage, but it does make sense for Amazon to bring down their pricing structure even more than they have already. Amazon is continually seeing pressure from both ‘true’ Android tablets and even the iPad Mini. Let’s not forget that the Nexus 7 2 could be just around the corner, and then there is the low cost Android tablets from brands like Coby.

The idea of a $99 Amazon tablet seems crazy-cheap, but if vendors like Coby can do it, so can Amazon. This is especially true when you consider that Amazon doesn’t need to make money on its tablets, it can sell at cost and make back the money through its services.

Despite the writing on the wall that indicates Amazon needs a cheaper offering to stay competitive, Amazon actually denies a price drop of this magnitude is coming. “We are already at the lowest price points possible for that hardware,” a company representative claimed to TechCrunch. Of course they did say that hardware, and didn’t directly deny that they could be preparing a cheaper version with similar hardware.

What do you think, would you pay $99 for a Kindle Fire HD, or does its locked-down Android fork keep you from being interested?

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