The rumors first materialized in March of this year, when Wintek, a manufacturer of LCD screens and touch panels, was reported to be supplying Apple with touch screen panels for a netbook. Later, DigiTimes reported that it is indeed an “e-book form factor netbook”, which suggests a tablet. But speculation of an Apple tablet has been going on since 2005 because of numerous touchscreen tablet patent applications on behalf of Apple.

Details about the specs are still murky. It will likely be based on the iPhone OS and run on a processor designed by PA Semi, a chip design firm that Apple acquired in 2008. It is not known how this processor would fair with the Intel Atom chips that the CrunchPad will use. Conflicting reports about the screen size include 12-13″, 10″, 9.7″,  and 7-9″. Price points have only been estimated so far, ranging from $500 to as much as $1000.

What does this mean for CrunchPad Inc? No apps.

While part of the iPhone’s success can be attributed to thousands of applications, the CrunchPad, which will run on Firefox and a Linux platform, will not enjoy the same benefits. Apple would not only bring apps to the tablet,  but would also bring a product with a brand label of trust and quality.

Michael Arrington cannot imitate Apple’s brand and customer service strengths in such a short period of time. But one of Arrington’s smartest moves so far was switching the CrunchPad casing material from plastic to aluminum. This made it thinner and visually appealing, something consumers have come to loathe about Apple products.

Gabe Rivera of the technology news aggregator Techmeme, tweeted that he asked Keith in person about the rumor and that he denied being recruited as CEO (Teare has also denied it himself here). But there is no report yet on whether he is being recruited for any other CrunchPad related position.

Arrington told the NYT last week that operations surrounding the CrunchPad are taking two-thirds of his time and he “will remain actively involved for now, but wants to replace himself at CrunchPad and return his full-time focus to the blog.”

This would not be the first time Arrington and Teare worked together. In February of 2006, they co-founded Edgeio, an online classifieds platform which was used by publishers. But that didn’t last long, and in December of that year Edgeio, run by CEO Teare, joined the deadpool. Former Altavista CTO Louis Monier, who is now leading efforts surrounding the CrunchPad, invested $1.5 million in Edgeio.

One of the main problems with Edgeio was its high cost structure. Teare burned through $6 million of cash at Edgeio in less than two years, and by the time it was auctioned off, they had 11 full time employees.

And indeed, criticism some what exists of Arrington’s abilities to sell the CrunchPad at a low price point while keeping costs down. Laura DiDio of ITIC told TechNewsWorld that “if he can sell it at around $300 and make money, more power to him.”

When Edgeio went under, Arrington said “In general I’ll say this – it is unwise for a company to spend a lot of money building out infrastructure before a product proves itself.”

The entire blogosphere went bonanza, but here is the kicker: they didn’t even get the Google logo colors right.

Update: A fake as expected.

Google has just announced the making of Google Chrome OS, its latest onslaught against Microsoft. Sundar Pichai, VP of Product Management, explains that users are fed up with current operating systems since they want to check email and browse the web without having to wait for a computer to boot.

FusionGarage, the Singapore start-up which was acquired by CrunchPad Inc., is also developing an awfully similar concept. In fact, Pichai’s post itself looks like a mirror of Michael Arrington’s post a year ago.

Comparing Google’s post with Arrington’s vision:

Google: We hear a lot from our users and their message is clear — computers need to get better.

Arrington: I’m tired of waiting – I want a dead simple and dirt cheap touch screen web tablet to surf the web.

Google: The software architecture is simple — Google Chrome running within a new windowing system on top of a Linux kernel.

Arrington: Just a Macbook Air-thin touch screen machine that runs Firefox and possibly Skype on top of a Linux kernel.

Google: People want to get to their email instantly, without wasting time waiting for their computers to boot and browsers to start up.

Arrington: The idea is to turn it on, bypass any desktop interface, and go directly to Firefox running in a modified Kiosk mode that effectively turns the browser into the operating system for the device.

Google: Later this year we will open-source its code, and netbooks running Google Chrome OS will be available for consumers in the second half of 2010.

Arrington: So let’s design it, build a few and then open source the specs so anyone can create them.

It’s a given for any device, not just mobile ones. They become a success by meeting the unmet needs of consumers. When looking through the history of portable computer devices, we don’t need a specialist to realize that new devices to access the internet took off because their predecessors were behind in portability, functionality, or affordability. As the PC evolved in the 90s, users were looking for something they could take to more places than just their offices and desks at home.

One of the answers to consumers’ needs of mobility and full functionality came with slate PCs as well as convertible tablet PCs, which were like laptops, but had special hinges so that the screen can be flipped and then folded onto the keyboard. They were targeted to business users who could use it to jot down notes with a stylus during meetings or fill out a predefined form away from the office (think health care and construction industries). These tablets were also appealing to students who used them for note-taking during lectures. But these tablets were priced at $1000-2000 which was above the consumer range, and were actually not so portable – most were above 4 pounds and well over an inch in thickness.

The next milestone was a while later when mobile internet browsing took off with the advent of the iPhone. It featured the best mobile browser at the time and web use was more mobile than ever. The iPod Touch filled the void for people who didn’t want another phone, but wanted web browsing and media playing around the house and on the go. The iPhone and the iPod touch fixed the traditional tablet PC obstacle by providing a portable unit that was reasonably priced.

Apple’s products however didn’t come without limitations. Both just had a 3.2″ screen and the Safari web browser, though earth shattering at the time, still had functionality limitations such as not being able to play Flash and was slower than PC browsers such as Firefox and Internet Explorer even under wifi. Something else needed to save consumers by providing a cheap portable device that has full web browsing functionality.

Netbooks, small and cheap stripped down laptops that usually run on Intel’s Atom processor, came to the rescue. Acer, Asus, and MSI were the early entrants, with every PC manufacturer following. Heck, even Daewoo and Commodore have one. Most netbooks come in the 8.9-10.1″ screen size range, which was still a reasonable sized screen for video playback and surfing.  These computers were perfect for web browsing (hence, netbook), priced in the range of $300-500, and weighed around 3 pounds. Consumers now have a low price, fully functional, small and lightweight unit.

The limitations with respect to mobile web surfing of traditional tablet PCs and smart-phones may have been overcome by netbooks. Surely there are payoffs to every device class. Some consumers do view the iPod Touch and netbook as substitutes. What else can the CrunchPad bring to the table that these successful devices couldn’t bring? Considering that the CrunchPad also runs on an Atom processor and sports a 12″ screen, functionality and portability will not be a game changer for it.

TechCrunch’s current branding copy is “Welcome to Couch Computing” with a picture of a model using it on a couch. From my observations through comments on blog posts and Twitter, many have found that the tablet would be ideal for lounging around the house. Can’t you also do that with a netbook you ask? Surely you can, but one can argue that a tablet might prove to be more “couch friendly” since you don’t need to stay seated and put it on your lap or a table. As Arrington and his team have rightly identified, one of the advantages of the CrunchPad reflects the various body postures you can use it in.

They could also find a use in kitchens or as kiosks for businesses, the same markets that all-in-on touchscreen PCs are targeting such as the HP TouchSmart, Asus Eee Top, and Dell Studio One 19. As suggested before, the CrunchPad could also be your formula for finally putting your fitness equipment to use. Outside the house, they might be substitutes for portable DVD players. You may see people carry these in their messenger bags and purses to use while commuting on the train if we assume the it will have a 3G connectivity option.

The CrunchPad’s biggest need that hasn’t been met by netbooks however is e-reading. TechCrunch has been hush about its e-reading capabilities, but this is actually what many users are hoping it can be used for. The CrunchPad may be capable of both e-reading and web surfing, while Amazon’s Kindle is only for e-books. Amazon has its own DRM-restricted format (AZW) for new and old books, but the Kindle does not support PDFs. CEO Jeff Bezos did mention that consumers should expect Kindle books to come to more mobile devices in a similar fashion to the Kindle for iPhone app. Whether Arrington or other hardware developers have had any contact with Amazon is not known.

The CrunchPad’s ultimate success is contingent upon three questions: [1] what current devices is it a substitute for, [2] what consumer needs have not been met already,  and [3] do they want to spend $300 on yet another device.

Update: The NYT has corrected the price and thickness. Too bad, not $250 anymore.

The San Francisco Business Times wasn’t the only one that interviewed Michael Arrington recently. The New York Times interviewed him over the weekend and more juicy details have emerged.

The CrunchPad will sell for less than $250, which was actually Arrington’s low end estimate (correction: it will sell for less than $300, which was Arrington’s high end estimate) . In April when pictures of Prototype C were released, he said it can be built for less than $250 and “you can sell it for $300 and probably not go out of business.”At this price point, consumers might not be as hesitant to purchase yet another mobile device to access the internet. It will come in several colors and be 0.7 inches (18 mm) slim, which is a tenth more than the recently announced Archos 9 (correction: it will be 0.6 inches (16 mm) thick, the same as the Archos 9).

In addition, the NYT report mentions that most of the 14 employees in Singapore are part of FusionGarage, and that “TechCrunch is now closing its acquisition of the start-up.” FusionGarage is the OS-less start-up led by Chandrasekar Rathakrishnan, a proven entrepreneur in his own right.

In the post that kicked off the project in July of 2008, one of Arrington’s dreams was that the tablet would boot straight to the browser. “The idea is to turn it on, bypass any desktop interface, and go directly to Firefox running in a modified Kiosk mode that effectively turns the browser into the operating system for the device,” he said. But in September of 2008,  FusionGarage was one of the participants at DemoPit, an event part of the annual TechCrunch50 conference where start-ups launch their products or just get more exposure. It is here where Arrington’s dream came true.

After leaving a business law firm that specializes in technology companies, he founded and worked for several internet start-ups in the US, UK, and Canada. He then took time off, and in an apparent way to educate himself about the internet, started writing his findings and ideas online. Soon his TechCrunch baby was born, and it’s now on fire.

As Arrington’s success grows in media and hardware in the coming years, we shouldn’t be surprised if either a biographer chronicles his life in more detail or if he writes his own memoir. After all, he’s already one of the most influential people in 2008.

In addition, I spotted a German CrunchPad fan site but you can view the Google translation here.

As we get closer to the release date, TechCrunch should be trying its best to keep the hype from dying off by giving fans a sneak peek of the product and confirm details about its e-reading capabilities.

Update: There’s also a French CP fan site now.