Google is aiming to ship as many as eight million of the Asustek-made tablets in the second half of the year, throwing down the gauntlet to other low-end tablets such as Amazon.com Inc's Kindle Fire and Apple Inc's iPad mini, the sources with knowledge of the new product said.
This is the first time details about the timing and sales targets for Google's new tablet have been unveiled, although the company has not publicly released any information.
Google, which gets almost all of its revenue from online advertising, wants the aggressively priced Nexus tablets to be a hit as more Nexus users would mean more exposure for Google's ads.
The latest version will have a higher screen resolution, a thinner bezel design and adopt Qualcomm's chip in place of Nvidia Corp's Tegra 3, which was used in the first Nexus 7s released last year, the sources said, declining to be identified because they are not authorised to speak to the media.
In a blow to Nvidia, Google weighed both U.S. chipmakers' processors but finally decided on Qualcomm's for power reasons, one of the sources added.
Qualcomm and Nvidia are competing aggressively in the tablet market as they seek to expand from their traditional strongholds of cellphones and PCs respectively.
A Google spokesman declined to comment on its new tablet. Qualcomm and Nvidia also declined to respond to questions.
Google and other traditionally non-hardware companies like Amazon and Microsoft Corp have begun making inroads into mobile devices as consumers increasingly access the Web on the go.
Google introduced its first tablet last June, hoping to replicate its smartphone success in a hotly contested market now dominated by Kindle Fire and iPad.
The Nexus 7 joined the ranks of smaller, 7-inch tablets popularised by Amazon and Samsung Electronics, among others.
Pricing is yet to be determined and Google's plans are fluid, the sources said. Market leader Apple is expected to launch new iPads this year as well, possibly forcing its competitors to change their assumptions.
Google may choose to sell the new gadget for $199, the same as the first generation rolled out last June, while the old model may be discounted, one of the sources said. Alternatively, the new tablet could be priced more competitively at $149 and the previous model discontinued, the source added.
The cheapest iPad mini goes for more than $300.
Though pricing has not been finalised, discounting could play to Google's and Amazon's strengths by getting cheaper hardware into more consumers' hands to drive revenue from their core Internet-based businesses.
"This is the 'zero margin strategy'," said Fubon Securities analyst Arthur Liao. "Ninety-seven percent of Google's revenue comes from advertisement, so it needs to sell more mobile devices in order to reach more consumers."
The Internet search giant, which has never disclosed tablet sales, plans to ship six to eight million of the new Nexus 7s in the second half of this year, the sources said. That compares to an estimated 4.6 million Nexus 7s sold in the same period last year, according to Enders Analysis mobile industry analyst Benedict Evans.
The large volume could help to accelerate development of tablet-specific applications for its Android operating software.
Asustek, a netbook PC pioneer, will continue to co-brand with Google on the new Nexus 7. The Taiwanese company has said it aims to ship over 12 million tablets this year, almost double last year's shipments.
Asustek could not be reached for comment.
© Thomson Reuters 2013