How the Surface, Windows 8 and iPad Mini will kill the tablet also-rans

August 23, 2012

Microsoft’s Surface tablet and Windows 8 operating system are going to have a massive impact when they hit the tablet market in October.

Providing Microsoft gets it right in terms of attracting developers and making these tablets affordable, both will offer more choice for consumers and businesses and will become big players in what is an iPad-dominated landscape.

This, clearly, isn't good news for smaller tablet vendors, and recent comments would suggest that some of these are starting to fret.

“We have said [to Microsoft] think it over”, said Acer CEO JT Wang, when speaking about the Surface. “It will create a huge negative impact for the ecosystem and it is not something you are good at so please think twice.”

If those remarks sound desperate, that’s because they are. Like many other Android rivals, Acer is barely present in a tablet market in which the iPad accounts for two in every three sales.

Here's a breakdown of how Microsoft, Google and Apple's iPad Mini could kill off those tablet underachievers:

Microsoft is doing an Apple with Windows 8

The trouble for many Android tablet vendors is that not only does Windows 8 provide another iOS alternative, but that Microsoft is being Apple-like in locking down which vendors can use the operating system.

For instance, Microsoft has already banned HTC from the initial batch of Windows 8 tablet vendors for reportedly attempting to customize the home-screen, and has narrowed the selection of Windows RT (the version of Windows 8 using ARM processors) tablet makers to just four companies.

This is great news for Samsung, Dell, Asus, and Lenovo, but bad news for everyone else, although the Windows RT license will be opened up to all vendors from January.

Should Microsoft use a similar strategy for Windows 8 tablets based on Intel chipsets, snubbed vendors will be forced to try and play catch-up or just stick to Android as their only platform.

The Android market will no longer carry passengers

The trouble is, these vendors cannot even fall back on the Android market. As I’ve mentioned before, the Android space has improved greatly with the introduction of the Kindle Fire and Nexus 7, both which offer reasonable quality at excellent prices.

This effectively leaves the also-rans in 'no man's land' — not invited to the Windows 8 party but too pricey to challenge Amazon or Google in the Android space. Even if vendors pitch their products as more 'premium', they'll face a battle with Samsung and Asus, and who knows what will happen when Google's Motorola gets going.

And as TechCrunch's John Biggs rightfully observed recently, I suspect that many vendors will embark on a 'race to the bottom', an increasingly common trait according to one analyst:

"There are few innovations from vendors to differentiate their tablets; low price seems to be the major factor to attract consumers to buy tablets other than iPads," said IMS research analyst Gerry Xu recently.

This will not be an easy battle however, given the high tablet component costs (displays alone are around $90 to each OEM) and the fact that the likes of Amazon can afford to sell their tablets at a loss.

Summary: There will be two tablets markets

I am convinced that the iPad Mini will bring about two tablets markets; those tablets based on specs/features and those which offer bargain prices.

The iPad Mini could certainly make for a great 'bargain' tablet market, and will most likely attract would-be iPad buyers. Even those too tight for a $299 iPad Mini will make do with a $199 Nexus 7, Kindle Fire, or the $169 Kindle Fire when the new version comes to fruition.

All of this will lead to a point where some vendors – think Acer, Toshiba, and HTC – could quietly scale back their plans in the tablet market. RIM – which has its own problems – could also fall from view, as could those vendors offering over-priced Windows 8 tablets.

For as these guys focus just on hardware, and with no other benefits to be served by making tablets (Amazon and Google can afford to sell tablets cheaply because they have Appstore and Google Play), they may have no other option but to bid farewell.

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