Earlier today, perpetual rumor-mill DigiTimes reported that Google was readying a $99 Nexus tablet for release by the end of the year. It's not the first time we've heard such rumors: DigiTimes has already mentioned a $99 Nexus in the past, and CNET last week cited an NPD analyst as confirming a $99 Nexus would go into production before the year's end. Unlike some rumors, however, this one is fairly specific: it claims that Google is working with a trio of Asian manufacturers — WonderMedia, HannStar, and Quanta — to bring the tablet to market, and even goes so far as to name its processor, the WonderMedia PRIZM 8950. While there is a possibility that DigiTimes — which gets as many rumors wrong as it gets right — has this one nailed, it seems unlikely. Here's why.

The biggest problem lies in the processor, which would make powering anything more than a relatively low-resolution 480 x 800 (WVGA) display problematic. It's a single-core Cortex-A9 800MHz processor paired with a Mali-400 GPU, and regardless of Google's abilities to optimize its OS for lesser hardware, the combination of low-end CPU and GPU would likely make for a sluggish device.

A $99 Nexus might not live up to its name

With the right hardware choices Google might be able to put together a tablet at that price, and Chinese manufacturers have proved that to be true already. But what sort of specifications could we hope to see from such a cheap device? Many tablets intended for the domestic Chinese market are powered by the AllWinner A10 SoC. Although it's not the fastest chip around, we've spent some time with an AllWinner A10 device in the past, and found that it offered acceptable, although not stunning, performance. Google's would-be manufacturing partner, Quanta, also has a track-record for building devices on a budget: it's responsible for the OLPC's XO-1 and XO-1.5 notebooks. It seems entirely feasible that Google could throw a cheap tablet together, then, but why would it want to sully its Nexus brand with a third-rate chip from an unknown manufacturer?

It's probable that, should it be planning a cheaper Nexus tablet, Google would continue to turn to more-established chip makers like Qualcomm, Nvidia, or TI. Qualcomm has low to mid-range chips in its S4 Pro range that would be up to the task, such as the MSM8227 found in HTC's new 8S Windows Phone. Nvidia's Tegra 2 powered Google's first push into tablets last year and is still finding its way into smartphones from the likes of ZTE, and TI's OMAP 4 powers the $159 Kindle Fire. Amazon's tablet still sits $60 above the hallowed $99 mark, however, and it would be quite a feat for Google to bring a similarly-specced device to market, especially given the fact that the $199 Nexus 7 is already sold, with a low-price version of the Tegra 3, at cost.

The race to the bottom is on, but is the Nexus 7 already there?

Would a lesser processor and screen really enable Google to halve the price of a tablet without compromising its Nexus brand? Unlikely; but with strong competition from Amazon and Barnes & Noble, the netbook-style "race to the bottom" is on, and the very existence of the Nexus 7 indicates Google's willingness to play along. Google matched the Kindle Fire's price when it launched the Nexus 7, but Amazon has since upgraded and dropped the price of its tablet by $40. The thought of Apple releasing an iPad mini priced uncomfortably close to the Nexus 7 must surely be a worry as well.

With netbooks, however, the race to the bottom ended being a lose-lose for users and manufacturers. Many customers snapped up the super-cheap laptops under the premise that they offered a full-PC experience, and were disappointed to discover that poor performance and tiny, low-resolution screens made them unsuitable for everyday use. Similarly, manufacturers discovered that high-volume netbook shipments ended up reducing the sales of their more expensive, more profitable product lines. It's easy to see a $99 tablet doing exactly the same thing: disappointing customers with a substandard experience at the same time as eating into the sales numbers of more expensive devices. Google has to strike a balance between price, quality, and performance, just as it did with the Nexus 7, which despite its price feels like a premium product. It can either take a hit and sell the right hardware at a stupidly low price, or risk alienating customers and damaging its Nexus brand, with a low-power, low-price tablet.