Amazon’s upcoming version of its e-book reader Kindle, a tablet computer which will run the Android operating system, may be ready to challenge the Apple iPad.

The Amazon Kindle 3, the predecessor of the upcoming Kindle

Research In Motion and Hewlett-Packard have previously failed to dethrone the iPad with their PlayBook and TouchPad respectively. But the Kindle has its advantages, such a large audience to market to at the Amazon store and Amazon’s existing relationships with media and publishing companies, which will make it easy for users to access e-books and media. The Kindle is speculated to be priced barely above the cost of production, perhaps allowing it to fill a niche for cheaper tablets. And even if the hardware itself is not profitable, Amazon can gain revenue through the sale of e-books and media.

In addition, Apple’s distribution network in China has been unable to keep up with demand; Apple is lagging far behind its goals in opening stores in China. Some say that this may be an opening for Android tablets and smartphones.

However, the Kindle will need to be carefully positioned to make it clear to customers that it is no longer only an e-book reader; otherwise it may fall victim of the free-ride trap.