Before the arrival of Amazon’s Kindle Fire, Android tablet makers were mainly competing with each other and Apple’s iPad. Most tablets were priced at $400-ish and above, and none were nearly as popular as the iPad.
While Android holds the throne in the mobile OS market share, its tablet OS isn’t seeing the same popularity. Apple’s iPad still dominates the tablet market, as it has since its inception more than a year ago. To thrive, most Android tablet makers have no choice but to undercut the price of the iPad.
Even after doing so, they’re hardly making any dent in iPad’s lion share. And here comes the Kindle Fire, an Android tablet without a fancy specs sheet, but which sells at a ridiculous $200.
It’s no brainer. Once a customer decides that the iPad is a no go, the next obvious option is Android. Despite being the new kid on the block, Kindle Fire quickly comes to their mind thanks to Amazon’s aggressive pricing. Other Android OEMs can customize their UI all they want, no one is gonna remember them just for their skin.
Are you willing to pay $200 extra for a camera, microphone and 3G connectivity? What about $100? These are the questions that tablet makers want answered, because they can no longer stick to their original pricing.
The problem: How much lower can they go on their already thin profit margins, having to undercut iPad’s price while not enjoying the same discount Apple gets for its materials?
Amazon can sell the Kindle Fire at a loss, and it’s the only company that can afford to lose money for its tablet (well, besides HP, but that’s another story). The loss can be recuperated by the increased sales of Amazon’s digital and physical goods that the Kindle Fire will bring.
Other tablet makers have no such privilege. The deal is sealed once their tablets are sold. The only money-making opportunity they have lies in the hardware profit margin.
To put it simply, these manufacturers are now stuck in an awkward position. They can’t match the iPad in terms of popularity, and they can’t match the Kindle Fire in terms of pricing.
And the worst has yet to come. Amazon plans to launch a 10-inch tablet next year. If it can pull off such a pricing trick again, it may overtake the iPad as the top competitor of other Android tablets. By then, even the Apple may have to consider adjusting its prices.