Flood of low-cost tablets expected in $200 to $300 range

At that cost, which tablet will win out? Analysts say, watch for Amazon.com's upcoming device

Analysts are predicting that a flood of $200 to $300 tablet computers will hit the market this fall, prompting the essential question: Which device will come out on top?

Several analysts are betting on Amazon.com to be at the top of the heap with an expected $299 Android-based tablet that is likely to be introduced sometime in October.

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But its price tag -- which is $200 below the $499 starting price of the market-leading iPad 2 -- is only part of the reason why the 9-in. tablet is expected to do well. Analysts also expect the device to enjoy strong sales because they expect Amazon to offer content that approximates or even exceeds the content that Apple offers for the iPad. Amazon will make money on the content it sells, and that revenue is expected to more than make up for any loss it incurs in selling the tablet at a price below the cost of making it.

"Amazon has an ecosystem like Apple, with its own app store that offers music, movies and videos, and a bookstore," said Bob O'Donnell, an analyst at IDC. "Not only would you get a cheaper device [than the iPad], you would get the integrated Amazon experience. That's what makes Amazon's tablet the most interesting -- and it's where other [Android] tablets will be challenged."

In effect, Amazon's approach will be to entice buyers with a much lower price but offer "all the services of Apple," O'Donnell said.

Other Android tablets that will likely compete with Amazon's device include the $199 Lenovo IdeaPad A1. Announced Thursday, the IdeaPad A1 is the cheapest 7-in. Android tablet from a top device maker. Another contender is the original Samsung Galaxy Tab. Now available on Amazon for $279.99, the Galaxy Tab sold for $600 when it first appeared late in 2010.

That original Galaxy Tab is being replaced by the Galaxy Tab 7.7, which Samsung announced Thursday at the IFA conference in Germany. The Galaxy Tab 7.7 includes a Super AMOLED Plus display. Pricing in the U.S. hasn't been set, but the new device is expected to cost less than $800 without subsidies, according to Samsung officials in Sweden.

Analysts wondered what the price will be for the new, thin Toshiba AT200, which was also announced at IFA on Thursday. It has the advantage of shipping with Android Honeycomb, the tablet-optimized version of Google's operating system, while Lenovo's device runs the older Gingerbread version.

The price of the Hewlett-Packard TouchPad dropped to $99 after HP said recently that it planned to stop selling the device. But the company this week said it would make a final round of the machines because the low price sparked a sudden uptick in consumer interest. The TouchPad markdown was further evidence of the importance of low prices to buyers, analysts noted.

O'Donnell and other analysts said Samsung and most of the major tablet makers will likely bring prices down by the end of the year in order to compete.

Meanwhile, Apple isn't likely to drop the prices of its iPad 2 models very much, if at all, in the next few months, according to O'Donnell and Jack Gold, an analyst at J.Gold Associates.

IDC recently said the iPad and the iPad 2 together held a 68% share of the tablet market in the second quarter. Apple is likely to roughly maintain that market share over the next two years, even though its products cost more than competing devices. That's partly due to the fact that the iPad was first to market. But the more important factor is that "the iPad is considered a better device with a nice experience. And, for buyers, the $499 starting price is low enough to give it a try," O'Donnell said. "Until now, there hasn't been enough of a price gap to find something else."

Gold said the iPad will keep its higher price for a long while, just because "it is regarded as the BMW or Lexus of tablets, while Lenovo historically tends to be more of a Chevrolet."

Keeping to his car metaphor, Gold said that at $199, a Lenovo ThinkPad A1 tablet could be perceived by buyers as something of lower quality. "Perhaps a Hyundai?" he mused.

With tablet prices between $200 and $300, "that opens opportunities for buyers," O'Donnell said.

The Lenovo device's $199 price tag is especially interesting because Lenovo is considered an established manufacturer, analysts said. Some lesser-known electronics manufacturers introduced tablets for less than $200 during the 2010 fourth-quarter shopping season, but they didn't make much of an impact, O'Donnell noted. One company that did so, Augen, "is already out of business," he said.

Gold said that manufacturers have to be careful to assure consumers that low-priced tablets "are not a piece of junk." Low pricing tends to put pressure on manufacturers to use parts that are a generation older, and therefore cheaper, than what is currently available, Gold said.

"While $199 is potentially very attractive for consumers, it can be fraught with problems for manufacturers," Gold said. "Can companies like Lenovo or Samsung make any money selling them at that price? You'll see a lot of low-end tablet devices this fall, but the key is if the makers can do it profitably. If they can't, they won't do it very long."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

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This story, "Flood of low-cost tablets expected in $200 to $300 range" was originally published by Computerworld.

Copyright © 2011 IDG Communications, Inc.

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