Like it or not, there’s a race to the bottom in the tablet market that I fully expect to be in full form at this week's Consumer Electronics Show.
Amazon and Google made a genuine business of the affordable Android tablet market last year with models starting from $159 and $199 respectively, but that looks set to drop to $99 in the coming year.
From a consumer’s perspective, you’d think that this would be sure-fire success. After all, who wouldn’t be enticed by a hundred dollar product that could do basic email, social networking, browsing, games and maybe more?
Some of my friends and family, almost all of whom do not have a tablet, certainly would be interested and actually sought me out when they discovered they could get a discounted Kindle Fire for £99 ($159) on Black Friday.
My girlfriend's sister even mused about replacing her laptop (see Ben Bajarin’s comments on how laptops have over served the mass needs of the computing market) with the Versus Touchpad 7, a 7-inch Ice Cream Sandwich tablet being offered for just £45 (approximately $73) at Carphone Warehouse here in the UK.
There's no doubt these low-cost, almost disposable devices would appeal greatly to consumers, but also potentially to SMBs and schools working on a tight budget.
Indeed, it is not beyond the realms of possibility that developing countries could turn to such devices, as India has with the $35 Aakash, for light browsing and reading digital textbooks. Smaller businesses too could use them for simpler tasks, be that completing forms, digital signage at trade shows or having their retail staff show off brochures.
The trouble with cheap tablets
However, if you have look at the bigger picture, you can see how $99 or cheaper tablets could bring trouble in equal dosage.
For the manufacturers, there is the rather pressing problem of how they monetize. Amazon and Google may have been able to jump into the cheap Android tablet market by relying on content sales (Amazon through books and movies, Google through advertising revenues), but companies like Acer, Asus and others rely on these razor thin hardware margins.
And what makes this a real head scratcher for tablet OEMs is that building a cheap 7-inch tablet isn’t as affordable as you may think it’d be.
According to iSuppli, the LCD tablet displays and touchscreens on the Nexus 7 and Kindle Fire cost around $60 each, the processor and battery adding another approximately $20 and $10. The Kindle Fire’s build of materials is apparently the cheapest at $139.80, which indicates how difficult it is to make a tablet with a sub $100 price.
A good example of this is Acer, which had been expected to launch a sub $100 tablet at CES, only the hotly-anticipated Iconia B1 came out not quite that low at about $130.
Creative Strategies’ Tim Bajarin back estimated in October that tablet BOMs (Bill of Materials) could drop as low as $50 at some point, but even this figure could bring problems, namely the possibility of a much poorer user experience.
Nonetheless, there has still been talk of hardware vendors rolling out free or subsidized tablets, an idea which has also been raised by one newspaper publisher and embraced by two others (namely the Financial Times and The Times with the Nexus 7).
Concerms over malware; BYOD gone mad
Cheaper tablets aren’t even necessarily good news for consumers or businesses either.
NPD DisplaySearch analyst Steven Baker recently said that Black Friday sales were bad news for the tablet market, primarily because it resulted in some first time buyers being completely put off tablets.
Businesses, too, could get hit by this. For example, would the arrival of a $99 tablet see more SMB owners, CIOs and other IT decision makers opt for something cheap and cheerful, rather than a more expensive device that actually does the job?
The fact that these $99 models will run Android could also bring legitimate concerns over malware, and there's a question about the impact on bring-your-own-device (BYOD), too. IT is already struggling to control the devices coming into the workplace, and this could be further complicated if employees ended up trying and abandoning throwaway tablets at a moment's notice.
It may be that this business trend of looking at cheaper tablets has already begun — one IT decision maker recently informed me he was looking at deploying $60 tablets for students at his school.
In fairness, these budget models have improved greatly in a very short space of time. Anyone looking for a sub $100 tablet 18 months ago would have most likely picked up a tablet with a resistive (i.e. single and not multi-touch) display and the Android 2.2 Froyo operating system optimized for phones. The processor would be single-core and clocked at 800MHz or 1GHz, the memory at just 4GB.
The $99 tablets in 2013 will be in a different league. There will be capacitive touchscreens, they will most likely run Ice Cream Sandwich, have dual-core processors and native support for the Google Play app store. There may be 8GB of memory, although one report suggests some new models will be limited to 4GB.
So in summary, there’s no doubt that these super affordable tablets are going to come into the public consciousness, and for some people that will be fantastic. The big question however is whether these devices will be reasonable alternatives to more expensive, established models.