Amazon, faced with aggressive competition from Apple and its forthcoming iPad, is stepping up its hardware game. According to the New York Times, it has bought a small pre-product startup called Touchco and plans to merge it with its Kindle hardware division, Lab126. Two words: touchscreen Kindles.

Touchco, a six-person startup out of the New York University Media Research Lab, has developed a sensitive surface that detects multiple pressure levels of unlimited simultaneous inputs and which it claims to be able to produce cheaply, as detailed by the same New York Times writer reporting the acquisition, Nick Bilton, at the end of December. It has since taken the content off its web site and replaced it with a note saying, “Thank you for your interest in Touchco. As of January 2010, the company is no longer doing business.”

Amazon is trying to step up its Kindle game to match the market — for instance, opening the device up to outside developers’ applications — but as James at jkOnTheRun has repeatedly pointed out, what really matters for e-book readers is content. Meanwhile, Motorola’s handset division invested in French touch startup Sensitive Object late last year.

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