I think Apple will do fine with its devoted fans happy to pay a premium to be fashionable.
It's Amazon that's taking the big risk at red ink in hopes of making it up by becoming Number 2 in tablets and reaping profits on Amazon.com sales.
If it becomes Number Four or Five behind Samsung, Microsoft and say Asus, they will be burning through the profits their other business units generate.
That's really cool, an excellent tablet for under $200. This will probably open up new segments in market hitherto untested. While Kindle started off as an e-reader it has grown to threaten the prevailing players in tablets. I bet Samsung will be the first to respond to this rather than Apple. Aamzon has put Apple in a fix now though there are always going to be customers for the Ipad, the newer generation don't hesitate to experiment.
Selling hardware at cost ....has the potential to be a very disruptive force in the semiconductor industry. Does it force apple to move more in that direction for iPad mini? Does it force MS surface to do the same to establish an ecosystem arround windows RT?