As Apple introduced its third generation iPad, I was wondering why companies like Samsung, Motorola, Asus, and Sony are continuing to produce Android tablets? Seriously. From a business perspective it does not seem like they can make any money doing so.
Apple has sold approximately 55MM iPads. Combined, the other Android tablets (not including Kindle Fire or Nook) total 12MM. So there are at least five major companies fighting it out for 1/6 of the market. These companies only make money on the sale of hardware. Apple has become so large and can buy components in such great quantities that they seem to have an insurmountable pricing advantage.
For a while it seemed like they would try to compete by creating smaller 7 inch tablets but the competition there is now equally fierce. Amazon and Barnes and Noble are selling their 7 inch $199!tablets at a loss with the hopes of making a profit on the sales of digital goods (books, music, movies, and apps). Samsung cannot do that. Also, it is rumored that Google itself wants to sell its own “Nexus” tablet at the $200 price point (but I’m not sure to what end.)
How can other OEMs make any money at the high or low end? Personally, I don’t think they can. The problem is that Android tablets are marketed as essentially the same thing as the iPad, but without a rich supply of apps.
I do think there is room in the tablet market to make money but to do so you have sell something that is different than the iPad. I believe the opportunity is to sell Windows 8 tablets. Windows 8 offers things that iOS does not, and because of that tablets running it can be sold at a higher price. This means that the OEMs can make money as well as Microsoft.
The advantages Windows 8 has that van be marketed to tablet buyers include:
- The Metro UI is different than iOS and fun to use.
- Metro apps running on a tablet can also run on the desktop.
- Windows tablets have full Windows behind them and all of the compatibility that implies.
- Windows tablets will run Microsoft Office. Real Office. This will make these true business tablets.
- Windows tablets will have XBox integration.
- Windows 8 supports multiple user accounts to allow sharing a device.
Of course, Microsoft has to execute and deliver Windows 8 for the fall. The longer they delay, the more iPads get sold.
I think that this is the best chance tablet makers can compete with Apple at the high end. You cannot compete at the low end other than by selling content. Please note that I am not saying nor expect that these Windows 8 tablets will be “iPad killers” and crush Apple. They won’t. They don’t have to be. There is room enough in the market for both. Apple may keep outselling its competitors, or it may not, but it doesn’t matter. As long as there is healthy competition in the market, the tablet market will grow and thrive.