Amazon’s Android-Based Kindle Tablets Will Both Be Cheaper Than $499 iPad 2

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They say that no one but Apple can make a decent sub-$500 tablet, but Amazon not only thinks they can undercut the iPad in price once… they think they can do it with two tablet at once.

Following reports last week that Amazon would debut two Android-based Kindle tablets this year, new information has leaked giving the 7-inch “Coyote” tablet and 10-inch “Hollywood” tablet prices: $349 and $449 respectively.

Those prices not only undercut the entry-level iPad by a significant margin, but Amazon’s Kindle tablets will also be competitive in performance. The $349 tablet is rumored to come equipped with an NVIDIA Tegra 2 processor, which is roughly equivalent to the performance of Apple’s A5, while the $449 model will come with a quad-core Tegra T30 “Kal-El” SoC.

Amazon is going to have to compromise on displays to get these tablets to market though. Previous reports suggested that Amazon preferred dual-mode e-paper/color panels, like Qualcomm’s miracol displays. Unfortunately, those displays won’t be ready for mass market until 2012 at the earliest, meaning Amazon’s Kindle tablet will have to ditch the e-paper for LCD.

Amazon intends to get both of its Kindle tablets out in volume in time for the holidays, and if anyone can take on the iPad, its Amazon. Unlike the competitors, Amazon has a successful, vibrant, easy-to-use media store that encompasses music, video, ebooks and now apps… and they aren’t afraid to sell products at a loss in order to stick it to Apple.

With not one, but two Kindle tablets due out this holiday season and priced less than the entry-level iPad, should Cupertino start sweating? Let us know in the comments.