Google and Asus are teaming up to launch a new 7 inch tablet that will go head-to-head with the Amazon Kindle Fire, according to rumors. The new tablet may launch as early as May, according to reports.

We first told you about this rumored 7 inch tablet earlier this month. At the time it was said to have a quad core processor and be loaded with Android 4 (Ice Cream Sandwich). The expected cost of that time was reported to be $199.

Yesterday, DigiTimes said their sources told them it will sell from $199 to $249. They say that the 7 inch tablet was shopped around by Google, with HTC and Acer as possible partners. But for a variety of reasons Asus was chosen as the manufacturer.

No word from them on whether it would have a quad-core processor, as we heard earlier. However, DigiTimes does say this will be the first tablet that features the Google Play Store. Having the Google Play Store as a prominent feature would position the tablet to compete with the Amazon Kindle Fire, which is heavily dependent on Amazon’s content delivery system.

Will keep our ears open and report further details here it CP as they come in.