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Make it too cheap and Nintendo falls prey to negative perception of value. The fact it does use a tablet-like controller, which usually aren't cheap (the tablets themselves, I mean) and you are in for some $399 at least. Not that it is actually much cheaper to manufacture anyways. Maybe they will release for $349 if they are willing to sustain some minor losses like with the 3DS or the Gamecube.

But that's just me speculating.