Can Windows 8 tablets be priced low enough to compete with iPad, Kindle Fire?

Microsoft is supposedly charging tablet manufacturers $90 to $100 for Windows 8. One research firm estimates a Windows 8 tablet using an ARM processor will cost an average of $610.
Written by Sean Portnoy, Contributor

Microsoft is hoping the touch-screen-friendly Windows 8 is its ticket into the growing tablet PC market. But its pricing of the new OS may be doing the company no favors when it comes to competing against the established powers in the space.

According to DigiTimes, tablets running the new OS and using ARM processors (a marked departure from Windows' usual reliance on x86-based chips) could have a hard time matching up against the iPad and Kindle Fire price-wise. That's because Microsoft is supposedly charging vendors $90 to $100 for Windows 8, which would balloon the cost of materials enough to make it difficult for tablet makers to turn a profit. According to TabTimes, that amount is significantly higher than the $50 Microsoft charges manufacturers for PC versions of Windows.

Apple and Amazon can keep costs low because they either manage the supply chain ruthlessly (Apple) or can sell content to users post-purchase. Windows tablet makers won't have either of those advantages. Furthermore, Windows 8 slates using ARM processors won't be able to use existing x86 applications, which limits one of Microsoft's main selling points for tablets running the new OS -- backward compatibility with all those Windows programs you already have. (There will be a version of Microsoft Office included for ARM tablets, at least.)

Market research firm IHS is estimating that the average selling price for an ARM-based Windows 8 tablet will be $610, which is slightly more than a new 32GB iPad. An 7-inch version would obviously be far cheaper, but could they priced in the same ballpark as the Kindle Fire, especially if Amazon decides to drop the $199 price in exchange for running some splash-screen ads?

No doubt Microsoft could throw marketing dollars toward the vendors to help defray the slim margins, much as Intel has reportedly been doing to promote the Ultrabook platform. Speaking of Intel, the pricing difficulties for ARM-based Windows 8 tablets could help the chip giant, which is looking to jump into the tablet game with Windows 8 models of its own. Intel could also subsidize manufacturers using its chips to produce Windows 8 tablets.

Enterprises may be willing to tolerating paying slightly more for Windows tablets knowing that they will come with a version of Office installed, or in the case of Intel versions, be compatible with existing Windows software (including the security apps their IT departments rely on). But it will be tougher to stoke consumer demand, which is more price sensitive, especially given the iPad's formidable library of apps that are built specifically for it.

Will Microsoft be able to match Apple in pricing for 10-inch tablets, and Amazon for 7-inch ones? What is the price you would be looking for in order to buy a Windows 8 tablet? Let us know in the Comments section below.

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