Can Amazon’s budget tablet challenge the iPad?

For months prior to the Kindle Fire announcement, pundits were quick to label it “iPad killer.” However, Google has more to fear than Apple: the 7-inch device further fragments Android with a slick new UI that completely disguises (and improves upon) the search giant’s mobile OS, while the $199 price tag slyly kneecaps the search giant’s own tablet partners. This is not an iPad killer–but it doesn’t have to be. Kindle Fire is the newest weapon in Amazon’s content strategy, mixing music, video, and apps with a familiar brand that ties neatly into an ever-expanding ecosystem.

At 14.6 ounces and under half an inch thick, the Fire feels good in the hand, with a solid build quality. The diminutive exterior is ripped from the BlackBerry PlayBook design template, but internally it’s a completely different animal (1GHz OMAP 4430 processor, 512MB RAM, and 8GB storage). Unlike Kindles of yore, there’s no 3G data–it’s strictly Wi-Fi 802.11b/g/n. There’s a single hardware button at the bottom for power and sleep (you may have to squint to find it), micro-USB and 3.5mm headphone ports, plus a pair of stereo speakers up top. There is no camera, HDMI port, SD slot, Bluetooth, or GPS—but we really didn’t miss them.

Kindle Fire boots up in a respectable 38 seconds and Amazon’s endgame is laid before us: built-in Newsstand, Book, Apps, Music, and Video stores prominently perched atop the home screen (along with Docs and Web), luring users into buying with a few taps (which extends to the website itself, thanks to the built-in Shop app). Sign in with your Amazon account and existing cloud data is ready and waiting, although you can also shuttle content from your Mac via USB.

The simplicity of the hardware design is repeated in the interface. Rather than icons everywhere, the majority of the home screen is a rotating carousel of recent content, with favorites pinned underneath. Notifications and status icons appear above, with quick access to orientation lock and other system settings—including the ability to sideload apps from other sources. Looking at the Fire, it’s clear that Amazon has one-upped Google by adding spit and polish to the cluttered Android OS.

With only 10,000 apps, Amazon’s Appstore isn’t as title rich as Android Market, third-party updates frequently take longer to arrive, and Google-branded apps are nowhere to be found. But the staples are all here, including Angry Birds, Pandora, Words with Friends, Evernote, and Plants vs. Zombies. Combine Amazon Instant Video with the free Hulu Plus and Netflix apps and Kindle Fire offers more video content than Google or even iTunes can provide.

Kindle Fire’s 1024x600 IPS screen is bright, colorful, and sharp, but the touchscreen is nowhere near iPad sensitivity, requiring exact placement of your finger—and occasionally more than one attempt—before buttons respond. Software-based controls become a hindrance in many third-party apps, requiring you to pull up the menu bar to change volume. Built-in Web, Email, and Contacts apps may not be as slick as their iOS equivalents, but they’re improvements over standard Android fare. Those quirks aside, at 199 bucks Kindle Fire is still a spectacular buy for content junkies and casual users on a budget.

The bottom line. While the iPad continues to offer the slickest tablet experience overall, we actually prefer the Kindle Fire for reading books, and the 7-inch form factor is a nice middle ground between smartphones and a 10-inch tablet. You’ll have to pry the iPad 2 out of our cold dead hands, but we like the Kindle Fire enough to keep it around as an alternate option, which is more than we can say for almost all the other tablets we’ve used.