Tablet battle intensifies

06 July 2012

NEW YORK: Apple, the electronics giant, could soon launch a smaller version of its iPad tablet, in a bid to counter similar devices from rivals such as Google and Amazon.

According to sources quoted by Bloomberg, the information provider, Apple may unveil a "smaller, cheaper" iPad by October 2012.

It is expected to have a screen of between seven and eight inches, and a price point closer to that of Google's Nexus 7, built in partnership with Asus, and Amazon's Kindle Fire, both commanding $199.

"It would be the competitors' worst nightmare," said Shaw Wu, an analyst at Sterne Agee & Leach, the investment management group. "This isn't like the old days, when it cost thousands of dollars more to buy an Apple product. Fifty or a hundred bucks wouldn't be enough to make someone switch."

In another report, the Wall Street Journal stated two of Apple's component suppliers in Asia have been instructed "to prepare for mass production of the smaller tablet", starting in September.

As per the Bloomberg report, this gadget is due to have a screen of under eight inches, compared with 9.7 inches for each generation of the device since the first iteration hit store shelves in 2010.

Figures from Gartner, the insights group, showed that Apple currently holds 61% of the tablet market, which is in line to reach a value of $66.4bn in 2012, DisplaySearch, the research firm, predicted.

UBM TechInsights estimated the latest WiFi-only iPad costs $278 to manufacture but retails at $499, giving Apple a healthy profit. The components in Google's Nexus 7 cost $184, versus $153 for the Kindle Fire.

"Apple is making margin on the devices," said Jeff Brown, UBM's vice president of business intelligence. "They definitely have the high end sewn up."

Michael Gartenberg, an analyst at Gartner, argued that Amazon loses money on the Kindle Fire, but hopes to recoup these losses by selling extra books and digital media via the devices. Google, by contrast, could lean more heavily on ad revenues.

Hardware companies, however, face greater struggles. "How does Samsung make money in tablets, when Google is partnering with Asus to make a product that makes no money?" Gartenberg asked.

For its part, Microsoft introduced the Surface tablet in June, which will be roughly the same size and price as the existing iPad.

As Google and Microsoft use their own operating systems, a failure in the tablet space might be damaging elsewhere. "They're really sticking their necks out this time, putting their own brands on this front and center," said Wu.

Data sourced from Bloomberg/Wall Street Journal; additional content by Warc staff