Apple’s iPad tablet computer has been in the news a lot in the past few days. For example, it’s been widely reported that the NFL’s Tampa Bay Buccaneers team has given every one of its 90 players an iPad 2 to view playbooks and watch videos. That’s pretty cool because rather than carry around a playbook the size of a telephone book, players can simply carry the iPad instead.
But it’s a second news item really caught my eye—one about competition and a potential market shift. An Agence France-Presse story picked up and run by IndustryWeek explains that while Amazon has not publicly announced plans to produce a tablet, numerous press reports have said the company will introduce a tablet this fall. According to the story, The Wall Street Journal reported last month that Amazon plans to unveil a tablet computer powered by Google’s Android operating system before October. The New York Post, citing a “a source with knowledge of the plans,” said last week that Amazon will enter the tablet market in late September or October with a device that costs “hundreds less than the entry-point $499 iPad.” The article also notes that like the low-priced Kindle, Amazon would not be looking to make a profit on the hardware but instead from digital content such as books, music, movies, games, and applications sold for the device.
Tablets, which, let’s face it, so far really means the iPad, are hot. According to a report from IHS, global media tablet shipments now are expected to rise to 60 million units in 2011, up 245.9 percent from 17.4 million in 2010. These figures drive the firm’s forecast of media tablet shipments to be 275.3 million units in 2015. Apple, of course, has the lion’s share of the market, and will ship 44.2 million iPads in 2011, according to the IHS forecast.
All the momentum in the media tablet market is with Apple right now, says Rhoda Alexander, senior manager, tablet and monitor research for IHS. Competitors can’t seem to field a product with the right combination of hardware, marketing, applications, and content to match up with the iPad, she says.
That all could change, however, with Amazon’s entry into the marketplace. In her blog post, Sarah Rotman Epps, senior analyst at Forrester Research, notes that Amazon is capable of disrupting not only Apple’s product strategy, but that of other tablet manufacturers’ as well. What stands out, Rotman Epps says, is that Amazon’s willingness to sell hardware at a loss--combined with the strength of its brand, content, cloud infrastructure, and commerce assets—could position it as the only credible iPad competitor. Indeed, if Amazon launches a tablet at a sub-$300 price point, assuming it has enough supply to meet demand, Forrester can see Amazon selling 3-5 million tablets in the fourth quarter alone, she says.
The operative word here, however, is “supply.” Sure, there clearly is market demand, and sooner or later, somebody is bound to emerge as a significant competitor with Apple. However, that doesn’t mean it will be easy for them. Apple has a winning combination of hardware, marketing, applications, and content, but equally important, it also has a strong and clearly established supply chain.
As has been previously noted, Apple Chief Operating Officer Tim Cook has said Apple invested $3.9 billion of its cash reserves in long-term supply contracts. And while he declined to say which components Apple had put its money toward, Cook did say that it was a strategic move that would position the company well in the future. Some analysts believe the investment is related to touch panel displays that are the centerpiece of devices like the iPhone and iPad. If so, the investment could secure as many as 136 million iPhone displays, or 60 million iPad touch panels.
It certainly is an interesting market to watch.