You can get a decent amount of hardware for that price, as long as they aren't going to want to make a profit. Apples vs oranges I know, but look at the (made in UK) Raspberry Pi for $35.
The screen is by far the biggest component of the BOM in the Nexus 7. Compromising that is the only way to substantially reduce the price. To hit $99 everything will be on the table, but RAM is cheap, and so are capable ARM SOC's. It won't be Tegra 3, but it will be good enough.