The Invasion of Cheap Tablets

on February 25, 2013

Fotolia_42210115_Subscription_Monthly_XXLGiven the massive market demand for tablets and the fundamental shift in consumer sentiment from PCs to tablets, it was only a matter of time before the tablet race to the bottom took place. I wrote about how this was happening in China at rates hard to fully comprehend. It looks like 2013 will be the year cheap tablets start showing up in numbers at retail in mature markets like the US and Europe.

The precedent for these products was already set by the Nexus 7, which has likely been the most successful Android tablet to date. The last data checks I saw at the end of 2012 suggested that the Nexus 7 was selling around 1 million units a month. That may have slowed as of late but I’m sure it is still selling well.

It seems that the sweet spot for Android tablets has been in the sub 8-inch screen size and I don’t see that changing in the short term. At MWC 2013, Samsung and HP have just added more flame to the fire of Android tablets. Samsung is coming out with an 8-inch version of their Note product line and HP is bringing their first Android tablet to market with a 7-inch device called the Slate 7. Pricing and availability is yet to be disclosed on the Samsung Galaxy Note 8.0 but I expect it to be in line and most likely slightly less than the iPad Mini. If it costs more, it’s DOA. HP on the other hand chose to be very aggressive with the pricing of the Slate 7 and will bring it to market at $169 and will be available in April. These are the first of many Android tablets I expect to see in 2013 with 8-inch or smaller screens and at lower cost price points.

The Role of Cheap Tablets

Believe it or not, I believe these products have an important role to play. They will help mature the market for tablets and they will bring low-cost entry points to the Internet into the home.

The market for tablets is still immature. Even though there are now well more than 150 million tablets (mostly iPads) out in the wild, there are still many consumers who have not owned a tablet nor have they deciphered what their needs, wants, and desires are with such products. This understanding is a critical part of the adoption cycle and it requires an understanding of what a product means to a consumer. This is also something that only comes with ownership. Having a plethora of choice around tablets, from small to large as well as varying price points, is a healthy part of product market maturity.

The other role I think these devices play is one of low-cost Internet access points. I’ve stated in previous columns my belief that some tablets in the home will not be personal but will be communal. They will be products anyone can pick up and use and will be likely not tied to one person but perhaps more tied to general entertainment, media, automation, or other general cloud services relevant to the household as a whole rather than one specific person.

Last Friday I pointed out how I am doing this now with more than a dozen tablets in my own home. Everyone has their personal one, which they have customized but since we don’t carry them around with us everywhere, we have communal tablets one can use for web browsing, streaming media, playing games, etc, lying around the house for free access. Low-cost tablets will make experiences like this more a reality.

Winners and Losers

The arrival of low-cost tablets from major brands (especially legacy PC ones) will certainly impact many players in the technology industry–some more than others. In the case of HP, I found this strategy interesting because one of the things a low-cost sub 8-inch tablet does is it continues to emphasize dependence on a traditional PC form factor. By keeping this particular tablet in the low-end both in terms of price and experience they are not in danger of cannibalizing their PC sales, even still, others may cannibalize it for them. Regardless, I actually think this is a smart move for HP in the short term. They need to figure out their software and services add value on top if they want to stay relevant in the long term.

Samsung will keep doing what Samsung does, which is offer a wide range of devices in all shapes and sizes and price points.

The real loser in an invasion of low-cost tablets, in my opinion, is Microsoft. They are just getting started and they have no intention of allowing their customers to compete in the lower end of the tablet spectrum (they don’t even have a 7” tablet offering near coming to market). I expect these low-cost tablets to hurt the adoption of Windows 8 tablets initially but not necessarily in the long run.

Of course that leaves Apple. I’m sure the Apple naysayers and critics will look at all the cheap tablet buzz and assume that this means danger for Apple. I certainly don’t believe that is the case. Apple has no intention on competing with the lowest end of the market. They chose to compete on experience and have proven they can do it extremely well. I also believe they don’t want to price themselves out of the market and will do anything necessary to keep their products affordable. There is a market for cheap but there is also a market for high-value products which are affordable. There is a big difference between cheap and affordable. This strategy alone for Apple can keep their profit share high even if they have smaller market share.

We will see how this all plays out. I’m not sure the degree the current tablet forecasts took into consideration the size and scale of the potential cheap tablet invasion. My gut tells me all the current tablet forecasts for 2013 are still much too conservative.