The double-edged sword facing competitors of the iPad

The double-edged sword facing competitors of the iPad

Summary: Android tablet makers face a no-win situation competing with the iPad. Pricing is only one area that gives them trouble. Apple's profitability is the biggest problem competitors face.

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TOPICS: iPad, Mobility
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Image credit: Apple

The CES is behind us, and as expected a number of companies showed the tablets coming to try and knock the iPad off its white pedestal. The expected companies are busily churning out one tablet after another, of all different sizes, in an effort to grab some of the tablet sales currently enjoyed by Apple. What these companies are contending with in the iPad is not the standard fare of competition. Apple has leveraged its supply chain influence to make a double-edged sword in the iPad that others just can't touch.

There are a bunch of companies churning out one Android tablet after another, trying to capture the attention of buyers that frankly just don't care. These tablets are all basically alike, with little to distinguish them from one another. Tech enthusiasts line up behind them for the better hardware, ability to customize them, and sheer power, but regular folks don't care. Android tablet makers haven't figured out how to deal with this, and it shows in the market.

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To make matter worse for iPad competitors, Apple was able to price the iPad very cheaply from launch. Much has been written about this bold move by Apple that still has competitors scrambling even today trying to match iPad pricing. Top Android tablets are still not much cheaper than the iPad, as no one can match Apple's position in the supply chain to get things built as cheaply.

Not being able to build tablets as cheaply as Apple is bad enough, but the real problem the competition faces is profitability of the tablets being sold. Cutting every corner possible to get the retail price of tablets down to compete with the iPad, leaves a very thin profit margin, as is the norm in the consumer electronics business. Introducing a new tablet to market is a big gamble for companies as there is not much wiggle room in the profit department to guarantee success.

It is almost unfair that even with iPad pricing at such a competitive level, Apple is able to make a huge profit. It is a double-edged sword that cuts competitors down, and it isn't going to change any time soon. Apple's current gross profit margin is 44.1 percent, a large part of that due to high iPad sales. There is no way any company can compete with that performance, especially with tablet pricing already a dicey proposition. It's as if Apple is telling competitors it will price the iPad at a level that will guarantee them trouble, and still make 2-3 times the profit on each one sold. That's what Android tablet makers face, and who knows for how long they'll be willing to do so?

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Topics: iPad, Mobility

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94 comments
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  • Careful, Apple fanbois will start getting upset with you

    There can only be one conclusion drawn from your post:
    It is a sick market. We all lose.
    toddybottom_z
    • RE: The double-edged sword facing competitors of the iPad

      @toddybottom_z
      So Apple fanboys are getting upset because ... Apple is owning the market (even if it's just over 50% now with the Kindle Fire). I think you are confusing Apple fanboys with upset MS fanboys like yourself who are upset Apple 50% - 60% market share far exceeds anything Windows can do. Try competing with the Kindle Fire first.
      anono
      • How many Fires were sold?

        @anono

        Very few know and they ain't talking. What we do know is, based on various web data stats, there seems to be about 9 million Android tablets in use today.

        It is like asking how many smartphones Samsung sold last quarter or in 2011. It is bad guess work at best.
        Bruizer
      • RE: The double-edged sword facing competitors of the iPad

        @anono Lets face it. The Fire is popular because of its price. Tech people don't buy it...it doesn't even have a volume button making changing volume in Apps a nightmare. The only people buying ti are those suckered into thinking they are getting a tablet when really they are getting an ebook reader and Amazon electronic shopfront.
        global.philosopher
    • RE: The double-edged sword facing competitors of the iPad

      @NonZealot

      Adrian has a post about Apple. You still have a chance to be the first to respond.
      msalzberg
    • RE: The double-edged sword facing competitors of the iPad

      @toddybottom_z No, "You're reading it wrong".
      jeremychappell
    • I called it

      @toddybottom_z
      Here come the Apple fanbois.
      toddybottom_z
      • RE: The double-edged sword facing competitors of the iPad

        @toddybottom_z So anyone who disagrees with your (frankly biased) point of view is an "Apple fanboi"?

        Good you know how open minded you are.
        jeremychappell
      • And the Apple hater president was first to post

        @toddybottom_z

        So what is your point?
        Bruizer
    • Excellence, not competition, is the desired result

      "It is a sick market. We all lose."-toddybottom_z

      Nonsense. When a company makes the best product at the lowest cost, that's as good as it gets.

      I often read others expound that "competition is always good". Ridiculous. GOOD competition is always good. Non-competitive competition should go away as fast as possible.

      When competitors can make products that are better than the iPad, that'll be a good day. Until then, we'll just have to make do with being able to a premium product for a bargain price.
      Falkirk
      • RE: The double-edged sword facing competitors of the iPad

        @Falkirk Asus has already made a product that Is Better than the iPad : the Transformer Prime.
        liveTexas
      • RE: The double-edged sword facing competitors of the iPad

        @Falkirk
        Also people are against Apple for some reason because they are dominating tablets and digital music players. They don't dominate any other market and they don't prevent other from entering the market...just look at all the tablets of various OSes and OEM's out there.
        People conventiently forget that Amazon dominates online retailing, MS dominates Office and PC OSes, Google dominates search and mobile OSes, Facebook dominates social, and so on and so forth. A lot of markets have a dominant player and as long as no company becomes the dominant player in too many markets then and instead are being kept honest in their own markets then there is not too much to be upset about.
        global.philosopher
      • RE: The double-edged sword facing competitors of the iPad

        @liveTexas

        "Asus has already made a product that Is Better than the iPad : the Transformer Prime."

        +100. The wife picked it over the iPad2 because it's faster, lighter and has a better screen resolution. Plus she got the 32G model for under $500 (tax included). A 32G iPad2 costs $599 + tax.
        benched42
      • RE: The double-edged sword facing competitors of the iPad

        Until the Android tablets can establish, for one - a better ecosystem; and, secondly, a more solid OS/hardware integration - the Android tablets are going to have a tough time. Plus, there's a lot of marketing that has to be done to make these products successful in the general market, and advertisements from Motorola and Samsung (to name a couple) are simply weak. Apple "imputes" high quality into their products: from the commercials to the stores to the software to the hardware.

        People have to remember, too (as I often bring up on these blogs), that Apple has a presence in education, whereby kids get used to Apple products early (and this was happening WELL before iBooks 2 was even thought). Android tablets just don't have that kind of exposure, at least not yet.

        Looking back at how Android captured most of the smart phone "market share" (by volume, not by revenue) - Android rode to success on low margin cell phone mark-downs and a basic/obvious use case that smartphones fill.
        And,yes, Android has distinct technical advantages in many areas over iOS, although it's not superior by any stretch. However, almost none of this is the case in the tablet (really "iPad") market (at this point).

        Also, in the case of Microsoft/IBM's rise: The first Macintosh computer was under-powered and there were no widely-adopted open standards (or an internet - at least not as we know it today) which closed hardware/OS systems could exploit. So, Microsoft's OS licensing scheme and adoption in the office was enough to "kill" the Mac.

        I think a lot of people simply make the assumption that the same (ie. marginalizing Apple's dominance down to no dominance) is bound to happen -quickly- in the tablet market, but it will take a lot longer due to many factors that are only at play in the tablet market.
        CJ135119F
      • RE: The double-edged sword facing competitors of the iPad

        @Falkirk -<br><br>Reading peoples' overly-simplistic/overly-simplified comments makes for some wonderful amusement today...<br><br>Thanks, y'all!
        HypnoToad72
    • RE: The double-edged sword facing competitors of the iPad

      @toddybottom_z
      So Apple introduce a tablet so low that even no name knockoff companies find it hard to compete (yet they still try) and that is considered losing!
      Good luck with you $900 hunk of junk!
      global.philosopher
  • No One's Going to "Give Up" on Tablets

    They'll be willing to do so as long as tablets are a viable consumer market and Apple won't license iOS. What's their alternative? Give up? Remember it took Android a lot longer to catch up in smartphones than they've even been available on tablets, so it's a bit premature to cry doom. Android has a global market penetration that positions them strongly to conquer the world and be in a stronger position to compete in markets Apple dominates. The tablet party is only just getting started. The Amazon Kindle Fire and the Ainol Novo7 show that they can win on pricing too... and while the Fire sells at a loss, the Novo7 at half the price of a Kindle sells for a profit.
    Technerdium
    • RE: The double-edged sword facing competitors of the iPad

      @Technerdium Except those numbers are still not generating much profit. In fact only Samsung are making much of a profit from Android smartphones, and that's still pitiful compared to Apple. Units sold isn't a very good metric here.
      jeremychappell
      • In your words

        @jeremychappell
        There is no competition in the smartphone and tablet markets. Only Apple will be in it for the long run since, as you admit, no one else is making much profit ("pitiful compared to Apple").

        It is a sick market (as you admit). We all lose.
        toddybottom_z
      • RE: The double-edged sword facing competitors of the iPad

        @toddybottom_z - *You* can still buy an Android tablet, no one is stopping you and no one is losing. If you'd like, I can google the nearest Best Buy to you, they've got tons in stock ;) Being a drama queen doesn't help your case.
        Delvardo