Production Costs for Technology

This is what confused and concerns me.  India has unveiled a prototype of a $35 touch screen table - hoping to release in 2011. 

This tablet will be on the very low end (in terms of technology), but the questions remains...HOW is this even possible?  There's something here that doesn't make sense.

My first thought was "oh - this is because third world labour - paying people like $3/day in India to produce". 

I'm sure that is part of the low cost, but what needs to be answered is how are the parts used in the production so cheap?  Again - I understand that they use inferior parts, but how is this even possible?  Is this a sign that we're paying through the skin for our technology?  If India can do it, couldn't we do it too?  I would love to see the true production costs for our technology.  Something just seems fishy to me.