The usually-reliable Wall Street Journal has added its voice to the frenzy of speculation about Google's plans to launch its own 7-inch Android tablet, apparently confirming an earlier report in Digitimes. This would be a brave move, considering that Google's previous hardware efforts -- the Nexus smartphone, Chromebooks and Google TV -- have been disastrous flops.
The Wall Street Journal's story, Google to Sell Tablets on Its Own This Year, says: "The Internet search company is planning to market and sell tablets directly to consumers through an online store, similar to rivals Apple and Amazon.com Inc."
The hardware will be made by "existing partners" such as Samsung and Asus, says the Journal, and "Some of the online store's future tablets are expected to be co-branded with Google's name, said people familiar with the matter."
The Journal, like Digitimes, is not naming its sources, but it notes that Google and Asus declined to comment.
The story adds: "To boost the prospects of its new online store for tablets, Google has considered subsidizing the cost of future tablets in order to compete on pricing with Amazon's $199 Kindle Fire."
So Google's hardware partners could see Google competing against them, and undercutting them on price. It's not hard to image the outcry if Microsoft had tried that in the PC market.
On March 28, Barron's -- which is part of The Wall Street Journal's publishing network -- picked up the Digitimes story, which said much the same thing: Google Teams with Asus for Cheapie Tablet, Says DigiTimes.
Fewer reports picked up on the major point of the Digitimes story (Google 7-inch tablet PCs to bring price-cut pressure on other vendors), which is that price cuts will destroy the manufacturers' 10-15 percent gross margin.
Amazon's $199 tablet, the Kindle Fire, is probably selling at a small loss, but it's providing Amazon with a platform to sell ebooks, music, movies and physical goods. Google can probably make up the difference in high-priced advertising. The Asian hardware manufacturers can do neither.
Currently, both Acer and Lenovo's 7-inch tablet PCs have already dropped to a price range of around US$279, leaving Asustek Computer's 7-inch MeMO 171 and some of Samsung's 7.7-inch and 7-inch models still priced above US$500; however, since Asustek plans to launch its new MeMO 370T with a price of $249 in the near future, Samsung may soon be forced to follow suit to drop its prices, while some second-tier white-box players are even reducing their tablet PC prices to below US$159 to survive.
It looks as though the Android tablet market is going the same way as the PC market, only worse. While the margins on PC sales were slim, Windows quickly dominated the market (taking more than 90 percent against Apple's 2-3 percent) and prices were relatively high ($1,000-$2,000). Today, Apple is the dominant player in the tablet market, and 10 percent of $200 is worth much less of a fight that 10% of $2,000 -- especially if you allow for 20 years of inflation.