"If Apple launches a sub-$300, 7-inch product into the market later this year as rumored, we expect the company's grip on this market to become even stronger," said Tom Mainelli, a research director at IDC.

Piper Jaffray believes Apple could sell 4 million to 6 million mini-iPad devices during this year's traditionally strong holiday shopping season -- equivalent to 20 percent of total iPad sales in the fourth quarter

"The most successful Android tablets' key points of differentiation are price and size," noted Piper Jaffray analysts Gene Munster and Douglas Clinton on Monday.

"Strategically, we believe the launch of a smaller screen, cheaper iPad eliminates the two biggest unique features for Android tablet makers," Munster and Clinton wrote in an investor note.

Lower Price Points Ahead

Though total Android shipments dropped sharply in the first quarter, Google is hoping that the 7-inch Nexus tablet it is building in partnership with Asus will help to reverse the trend. Slated for launch later this month, the Nexus 7 will enable Google to ensure that the new devices stay up to date with each new release of Google's Android platform.

"The search giant's new tablet will run a pure version of Android, whereas the [Kindle] Fire runs Amazon's own forked version of the OS that cuts Google out of the picture," Mainelli said.

Still, other tablets are coming that will directly compete with Apple 10.1-inch iPad offerings. For example, Microsoft 's own Windows RT-based tablet is expected to launch as early as October.

The price of Microsoft's first new Surface tablet will be a critical factor when it comes to winning over consumers. Moreover, ARM-based Win 8 tablets will enter the market without the backward compatibility -- and installed base -- that most people expect from a Windows machine, and so their "success in the tablet market is far from guaranteed," Mainelli said.

To compete in the tablet market with Apple, Mainelli said, rivals must introduce products at notably lower price points than Apple's iPad.

"We expect a new, larger-screened device from Amazon at a typically aggressive price point," he said. (continued...)

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