Google's Nexus 7 has no doubt put a damper on Kindle Fire sales. To sum it up best, the Nexus 7 is the best 7-inch tablet to own. Its display is sharper than the Fire, its thinner and it has at least one camera. That's all in the past, because the next Fire will supposedly kick the Nexus 7's heinie.
According to AllThingsD's, sources who were briefed on the next Kindle Fire say that it'll sport a new display with 1280x800 resolution (the same as the Nexus 7) up from the current Fire's 1024x600 that'll boost the pixel per inch to 216PPI, allowing for ultra-crisp text.
The next-gen Kindle Fire will also be thinner and lighter, and will finally come with a built-in camera. It's uncertain if that's a single front-facing camera or one for the back as well. One of the reasons the Kindle Fire doesn't have a camera is because the device is considered a consumption device for media and not really for interactivity.
Cutting out the inclusion of cameras also allowed Amazon to price the Kindle Fire at a low $200. Now that component parts have dropped, it's possible that it's finally affordable enough for Amazon to sell a tablet with a camera — even if it is a low megapixel one like the Nexus 7's.
It's strongly rumored that Amazon will announce a new Kindle Fire either by the end of the month or early August. Rumors persist that Amazon could release a larger 10-inch Kindle Fire, too.
One thing is for sure, the Fire will need to stay competitive with a $200 price or the Nexus 7 will eat it alive. True, Amazon has more content, but Google's encroachment is a signal that it's going after the Fire with its guns blazing. Amazon can't afford to sit on its laurels anymore.