The double-edged sword facing competitors of the iPad

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.

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.


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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