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Analyst Predicts Netbook-Fighting Apple Tablet

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The notion of an Apple tablet selling for $500-$700 is as ludricous as it is unbelievable. But that’s exactly what Piper Jaffray analyst Gene Munster is claiming we can expect from the Cupertino team by this time next year. As you can probably tell, I’m having massive doubts about this.

 

Even if the new device will only be a 7”-10” device, there’s no way Apple will be selling it at that price point. Let’s first consider the price of an unsubsidized iPhone 3G. At $700 for the 16GB version, the iPhone will either have to dramatically decrease in price or the tablet’s price must be significantly higher. I think the latter is more likely. Let’s now consider the price points of ““designer” netbooks. HP’s Mini 1000 Vivienne Tam edition costs $700. The Vivienne doesn’t even come with a touchscreen at that price. Apple’s simplistically elegant design is what sets it apart from other computers and is as much a selling point as is their OS (hence justification for the high price point compared to its ““lesser” Windows-based competitors). Add a touch screen to that and you can only imagine what will happen to the price. Third, if we look at the current crop of MIDs out there, we see that a fully functional and capable MID will run north of $700 — by a lot. Considering MIDs are essentially netbooks with a resistive touchscreen in place of a keyboard, it does seem quite far-fetched that Apple will be bringing a 7-10” tablet to market at that price. Speaking of which, can you imagine how much more Apple will charge to include a capacitive touchscreen in the 10” size? To date, there aren’t many ( if any)10” capacitive touch screens out there, so for Apple to make essentially a custom sized capacitive touchscreen will skyrocket costs. Finally, the new tablet is expected to be running a hybrid OS that combines touch functionality of the iPhone while maximizing usability of standard OS X. This is a recipe for more R&D on the OS side, which should drive up the cost of the device.

Moving on to the device itself and the hardware within, Apple has resisted the move towards the netbook space due to Apple not wanting to have its name on what it perceives as a sub-par and ““cheap” product. With that in mind, how likely is it that Apple will be using the Intel Atom processor that is so widely available now? If they do, they go back on their assurance that Apple doesn’t make ““junky” products. So what will they use then? There’s the upcoming Intel Pineview, but that chip will probably be in the next generation of netbooks as well. If they move up to Intel’s CULV (Celeron) processor, performance won’t be up to Apple snuff. And if they were to stuff Intel’s ULV Centrino processor in there to keep up with what users have come to expect from Apple products, the price will skyrocket. In order to keep the aura of quality from Apple products, high end components must be included. SSDs will probably be used in place of traditional platters, and we already know how much of a premium this alone adds. This is a classic case of ““you can’t have your cake and eat it, too.”

Don’t get me wrong, I think Apple making an in-house tablet would be great for the market in general and for tableteers in particular. With Apple’s traditionally ingenious marketing, the tabletscape will finally get the recognition it deserves. With Windows 7 coming soon and touch-based devices gaining more popularity, having Apple jump in the game will legitimize the whole segment for a much broader market. I’d love for Apple to come out with a tablet in the 10” range for around $700. It will definitely push the MID market forward and possibly help the MID market realize its potential. Unfortunately, Apple analysts and prognosticators don’t have a very solid track record when it comes to tablets. I’ve waited now for 2 long years to see something come out of Cupertino only to be disappointed time and time again. In light of the current economy, chances are slim to none that a new, ground-breaking, market-redefining product will come from Apple within the next year.

The only way I see Apple releasing a $700 tablet is if the device comes subsidized by the wireless industry. I predict the new device will have a price point closer to that of the standard MacBook line. With the advent of WWAN connectivity in netbooks, Apple can really jump on the bandwagon here to drive prices down. Much like how they did with the iPhone 3G, a partnership with wireless carriers can dramatically cut the price for consumers while still maintaining a healthy profit margin on the product. With all of this in mind, I don’t think Apples tablet (if it ever comes out) will ever be a ““netbook fighter” but rather would occupy a new niche in the mobile computing world.

3 Comments

  1. Rob Bushway

    05/21/2009 at 11:47 am

    a most excellent article, Truc. You really nailed alot of specifics that show the challenges an Apple tablet at that price point will face. I’m with you – it is going to have to be subsidized.

    However, I don’t think the iphone price is a factor. People will be choosing based upon size and may not necessarily want to hold a 10″ device up to their face. I see it as a two device play with many folks owning both.

  2. Sumocat

    05/21/2009 at 12:18 pm

    I agree with you in general, but I think you’re using the wrong point of reference for the pricing. A Mac Tablet would bear more resemblance to an iPod touch than an iPhone, and those top out at $400 with 32GB.

    As for R&D costs, they shouldn’t be that high. They already have the unibody process for creating solid frames, perfect for slates. Their capacitive touchscreens are custom-made for them already, so they’re just ordering a different size.

    Still, I’d expect them to stick with their NVIDIA + Intel platform, so they’d probably go with ION. That should keep it above the “junk” level but at a premium. Hard to see such a device coming in under $1000, particularly given the pricing of the Macbook Air which shares many of the traits I’d expect from an Apple tablet.

  3. Byron Allgood

    05/24/2009 at 9:38 pm

    Outrageous pricing for an unlocked phone has nothing to do with the actual component value of the phone.

    Make a phone too affordable, and people wont sign a contract. Considering the investments in marketing the phone made by AT&T they aren’t gonna be happy if half the Iphone users can easily circumvent a contract.

    Also how much does “Apple” make on a contract-phone sale? It ain’t what we pay. You know AT&T pays a premium for being the exclusive carrier. What if it is 6 or 7 hundred bucks?

    As previously stated the touch is a better comparison.

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