What Apple needs to maintain control of the tablet market

14 Comments

Apple’s iPad (s aapl) makes up 65 percent of customer demand for tablets, according to a new ChangeWave survey that shows interest in tablets overall up 130 percent. But for the first time, another single competitor has emerged to catch a very healthy percentage of shoppers’ attention: the Kindle Fire(s amzn).

Amazon’s tablet was the device of choice for 22 percent of the 3,043 customers polled by ChangeWave for its latest survey. The next closest device was Samsung’s Galaxy Tab, with just 4 percent of those surveyed expressing a desire to pick up that product. The Kindle Fire’s emergence as a strong second to Apple’s iPad is mostly bad news for other Android-based competitors, and less of an issue for Apple, which currently enjoys around 67-percent market share, but that doesn’t mean it should quietly allow the Fire to dig itself in as the budget-conscious shopper’s tablet of choice.

How Apple can put out the Fire

The easy answer, of course, is to make a cheap iPad, but that’s not something Apple will do easily or without a very specific, measured approach. Apple’s brand cachet and success depend on consumer perception of its products as high quality; just pulling things out until a smaller iPad resembles a Fire in terms of specs but runs iOS isn’t likely an option. That said, Apple also isn’t afraid to take a good idea from the competition and make it better in order to move hardware. That’s what I think it’ll do in this case.

Take away the huge price gap

Amazon’s Fire is really appealing because it provides cheap access to content acquired and stored in Amazon’s extensive ecosystem of music and movies, and its growing AppStore. The hardware is really secondary to those considerations, and likely accounts for why Amazon is willing to sell it so cheaply.

If Apple wants to regain its absolute dominance of the tablet market, it needs to take price off the table, but also to avoid setting itself up for the kind of criticism Amazon and other low-cost tablet makers face because of corner-cutting. It’s a tricky balance to strike, but Apple has a lot of advantages that could make it possible, chief among them being Tim Cook and his masterful control of the component supply chain. And Apple doesn’t need to close the gap entirely. It needs to bring an iPad close enough that the Kindle Fire’s faults seem like unwarranted sacrifices for what you save.

Apple can go cheap with few sacrifices

Amazon is taking a big risk on a relatively unproven market (7-inch tablets), and in doing so, it probably can’t achieve the parts-ordering volumes Apple could manage. That should allow Apple to eke out more profit per device even at a much-reduced price point. Apple is also making great strides in achieving big price breaks by leveraging older hardware; the free (on contract) 3GS is a great example. A smaller iPad would automatically save on display costs, and Apple can also save money using the older A4 processor (or an A5 if it debuts alongside a next-gen A6 for the existing iPad).

It will likely be difficult for Apple to get Kindle-Fire-cheap with a product it can stand behind, but the entry-level iPod touch recently hit the same $199 mark, and a similarly specced, slightly larger device at $249 (same price as the Nook Tablet) or $299 isn’t too much of a stretch to imagine. It would likely mean the death of the iPod touch in terms of cannibalized sales, but Apple is famously willing to release forward-looking products even if they might hurt past top producers.

Ecosystem plus

Apple’s content ecosystem can go toe-to-toe with Amazon’s, especially in international markets where lots of Amazon’s content isn’t available. ICloud and access to past iTunes purchases help make the differences between the two minimal, and despite Amazon’s big advantages with books, Apple still wins in terms of digital movie and music sales. If a smaller, cheaper iPad can provide access to that content, with fewer hardware/software downsides, it’ll win over customers, even with a price disadvantage.

Apple also still has a huge app advantage. That, plus value-add features like AirPlay, iMessage and other things iOS provides that the competition currently doesn’t, will be enough to win back Apple customers just looking for a quality 7-incher to fill out their gadget lineup. In terms of the early adopter crowd, that alone could pay big dividends.

Groundwork

Apple has the elements of a low-end market play in place: the pedigree of the iPod touch, its recent willingness to target mid-market by leveraging older tech, the lessons and supply chain control it has amassed in making the iPad a huge success, and the market-leading content ecosystem that continues to drive and be driven by its hardware device purchases.

Amazon’s ability to win out over other Android devices and take a big chunk of tablet interest by undercutting Apple on price might not even bother Cupertino. If it can’t work out how to make a competing device with a reasonable profit margin, it won’t bother. But if it can, that’s when we’ll see the real sparks fly in the tablet mark

14 Comments

ANDRE SALAZAR

The “original” iPad is $399. Refurbished, it’s $299, at the Apple.com. I’m not sure what bloggers are talking about when they say “Apple needs to regain tablet dominance”. They don’t make tablets, they make iPad’s! Tablets are failing to make a dent in the market. The “Fire” isn’t a good tablet. Apple doesn’t have any competition in mobile! They’ll keep releasing devices at their own pace & ignore the analysts, investors & bloggers that refuse to just “use” their devices & see for themselves why everyone wants them! These articles only expose the authors ignorance! No other comparable device can compete with the iPad, considering it’s years ahead of the competition. In March, the “A6” will change the PC-business forever!

H. Murchison

I agree. $349 7″ MiniPad should do it. Wifi only and 16GB of RAM and a solid IPS screen. There are many scenarios in which a smaller tablet would be sufficient or a more inexpensive tablet would be ideal. The glue that keeps everything together and Apple humming along nicely would be iTunes and iCloud.

At this point you’re selling the ecosystem. Nix the iPod Touch 64GB create a lineup that looks like this.

iPod Touch – 8GB,32GB
MiniPad – 16GB
iPad 3 – 16GB, 32,64

Apple has skin in the game in the content arena as well. They should be leveraging this as much as Amazon.

lrd555

The iPad has no competition. The Kindle Fire will have a 30 to 50% return rate and will leave so many consumers burned, that Apple’s market share of tablets will rise well above 85%. No one will dare buy anything but a iPad. You’ll see.

frank

geez people, calm down. no need to put out any fire. if capitalism has a bright side and has something to teach it’s that competition is GOOD. it keeps companies innovating and releasing new devices which gives US, the consumers, more options and better gadgets. just sit back, watch the big companies compete and spend your money in WHATEVER fits your needs and and wallet

Tod

It is kind of interesting if you think about it, I mean by default the fact that we are reading this means we are people who are somewhat in the know about technology and there for care about things processor and display etc.

The point that is getting missed with all of this is the fact that the vast majority of people do not care about those things, all they want is something that works and is in the price point.

While the fire is by no means the fastest, coolest tablet out there, what it is, is a tablet that is 200 bucks plain and simple. Yes the ipod touch is the same price but its not a “tablet” I personally think it would be in Apples best interest to have a 7in tablet, even if its just a re branded ipod, I mean its all in the name. You slap tablet on the end of it and it start selling.

Time will tell I guess but from what I have seen is that the fire while not the fastest is filling a need and as the people who don’t know what they want or even know why they want a tablet get one they will become familiar with android (even if its a pure flavor of it) and therefor more likely to get an android tablet in the future..

Anyhow just my two cents on a long winded reply

althegeo

Today’s iPod touch is the same price and does everything the Kindle Fire does and so much more. It also does things a lot better than the Kindle Fire.

Why would Apple need to remake the wheel?

Parkite

…..i think apple needs to put out a software fix to keep safari from crashing on my ipad all the time since 5.0.1 download. really frustrating. i don’t mind an occasional crash, but not multiple times per day. asleep at the wheel.

Sam Katz

If you google this issue and search the apple discussion forums, there are multiple solutions for this issue. I help out in a thread on the apple discussion forums about this issue. Include OS version number in your searches. Have you tried a restore and setup as new ipad? Have you tried clearing the website data and cookies?

Parkite

Hi Sam – I actually recognize your name from the forums on apple regarding this issue. I’d say there are a number of suggestions, but nothing definitive from what i’ve read. I haven’t done a restore yet, but i have cleared the cache. Seems to have helped a little. My point is that a browser should crash very infrequently. I use FF8.0 on a laptop and it *never* crashes. If you are going to have a lousy browser (safari) at least allow people the ability to download an alternative (FF, etc). Thx!

Atul

I do think that within an year or two, Apple will come out with a 6″ iPod Touch. I believe that Apple is not going to call anything less than 9.7″ an iPad.

The price? My guess is between $249-299.

kimon

I think Apple needs to make a Kindle Fire competitor as much as they needed to make a netbook.

Walter

I think Apple should take the same strategy as they did with the iPhones. When the iPad 3 is announced, they should keep the iPad 2 in the catalog. Perhaps just the 16 Gb model in both WiFi and 3G versions at maybe $299 and $399 respectively. That would provide an attractive entree to the iPad line without having to establish a completely new design.

dan

hmmm…how about Apple just knock $100 off the existing price line up. $399 entry level ipad probably squelches the fire.

Comments are closed.