Amazon-tabletAmazon is expected to ship a powerful 10-inch tablet in the first quarter of 2012, while its 7-inch tablet will make its way to consumers in October, according to Digitimes.

That timing isn’t exactly surprising: Amazon needs a cheap tablet out by this holiday season to compete with the Nook Color and iPad, and it’s larger variant likely needs more development time to make it competitive against next year’s iPad 3.

In May, the mobile site Boy Genius Report claimed that Amazon was developing a dual-core 7-inch tablet codenamed “Coyote”, and a powerful 10-inch quad-core tablet called “Hollywood.” Both tablets will run Android, but I wouldn’t be surprised to see some major design customizations from Amazon.

Sources tell Digitimes that Foxconn will begin manufacturing Amazon’s 10-inch tablet come the first quarter 2012. Foxconn also builds Amazon’s Kindle e-reader, which is also expected to get refreshed in the coming months. Amazon’s 7-inch tablet is said to be built by Quanta.

Amazon CEO Jeff Bezos practically confirmed that the company was developing tablets back in May. A new Amazon site design revealed yesterday also points to the company delivering tablets soon.

The company is expected to offer heavy integration with its media services in the tablets, and also offer the 7-inch model at an attractive price, likely between $200 and $250. Amazon is perhaps the best-positioned company to take on the iPad, since it’s an e-commerce giant with its own digital media offerings. The company could easily sell its tablet hardware at a slight loss — like Barnes and Noble did with the $250 Nook Color — with the hopes of making some of that back via media purchases.