iPad 2.0: Apple plans Valentine's Day massacre?

With huge Christmas sales predicted, Apple's plotting course for the release of iPad 2.0, perhaps even in time for Valentine's Day, (February) today's hot rumor claims, but there's some signs Apple plans a massacre as it prepares the ground for 2011's expected battle with tablets powered by Android's more tablet-friendly "Honeycomb" software.

[This story is from Computerworld's Apple Holic blog. Follow on Twitter or subscribe via RSS to make sure you don't miss a beat.]

A quick recap: Digitimes this morning claims Foxconn to be manufacturing next-gen iPads in order to ship the product "as soon as the end of February".

"Apple originally planned to start mass production in January, but because the device's firmware is currently still in testing, Apple has been postponing the schedule," the report reveals.

Previously I've speculated the next-gen lighter, thinner iPad will boast faster processor, more memory, FaceTime support, camera, a 3-axis gyroscope (a la iPhone 4) and, potentially, a mini-USB connection.

There's lots of speculation it may feature a new high-res 'Retina Display', but there's many who reject this idea, pointing to production and supply constraints. iPad 2.0 may include multimode CDMA-GSM chips in some configurations.

Game on Google

Google meanwhile is beginning to talk up for Android-powered tablet devices. Google Android boss Andy Rubin showed an Android Honeycomb Motorola Tablet at the All Things D Dive Into Mobile conference last night, saying this product would ship next year.

With a nod to mobile payment systems and other implementations of NFC technology ('iWallet'), Rubin also confirmed Android will support NFC on devices which carry the relevant hardware. (ie. Not all Android devices are as equal as others).

NXP Semiconductors is working with Google to provide a complete open source NFC software stack which will be fully integrated within Gingerbread, the latest version of Android. NFC support is already built-into the Nexus S, which Google announced yesterday.

Google appears to have beaten Apple to the punch on NFC.

Apple isn't expected to field such technologies in its iOS devices until next year, potentially including the iPad 2.0.

Pricing challenge

Some predict Apple will face challenges maintaining its 95 percent grip on the tablet market when new tablets running Android appear on the market next year.

Strategy Analytics expects Apple will face a "pricing challenge," suggesting "competitors may gain tablet market share by targeting consumers' price expectations, and that Apple will eventually be forced to offer lower priced iPads."

"Apple has had a clear run at the tablet market for the last few months," said David Mercer, Principal Analyst and the report's author. "As tablets from other major brands begin to arrive we expect price competition to heat up, and many consumers tell us they are waiting for lower-priced devices."

That lower-cost tablets may reach market is possible, but it is unlikely they will be as well-equipped technologically as the iPad.

Why?

Because Apple has already said it has done its best to bring its product to market at as approachable a price as possible.

Evidence for this is visible in the non-subsidized price of the Samsung Tab, the latest pretender to the iPad throne. This 7-inch tablet costs more (without subsidy) than Apple's 10-inch tablet.

As I've said before, I suspect competitors will be challenged matching Apple's prices, based at least on component shortages and supply, and Apple's large and consistent orders.

Apple's strategy doesn't need to stop at product improvement and market share.

The company also offers a powerful ecosystem for app developers. While Android has 100,000 apps, there's some dispute as to exactly how easy it is to develop for the fragmented platform. The big money remains found in iOS development, at least at present.

A thriving third party app market's only part of the story. There's another string to Apple's bow.

Price.

Apple's move to license a metal alloy technology called LiquidMetal may end up making for thinner, lighter iPad bodies, perhaps at lower cost than existing tech.

Apple may also have succeeded in using the size of its anticipated production (two or more million units per month is a significant order for any component supplier) to secure cheaper component prices.

Given too that Foxconn benefits from its position as a manufacturer for multiple products, Apple might perhaps be able to secure preferential production deals (though let's hope the workers have a better time than they did earlier this year).

These three potential reasons suggest ways in which Apple can drop its tablets at prices competitors can't match -- while also remaining profitable.

Those who argue Apple isn't prepared to play on price shouldn't ignore the company's realization that it is involved in a platform war. In a war like this one, greed may not be good. Marketshare's what counts.

There's one more strand.

Carriers in the UK, Japan, and other territories are beginning to offer heavily-discounted Wi-Fi/3G iPads to customers signing-up for long-term data access deals. In Japan, Softbank is even offering the iPad for free.

These low-cost deals clearly mean Apple is now able to play yet another game, meeting subsidized Android devices with subsidized iPads. When iPad 2.0 ships, will Apple continue to offer iPad 1 at lower or subsidized prices in order to scoop up more of the low-end market?

We'll know more next year, perhaps as soon as February.

What I think is going to happen:

Android-powered devices will claim some of the tablet market, but Apple will maintain strong sales and a leadership position. Expectations on price complications will prove unfounded.

I do not however expect Apple to maintain a Microsoft-like 95 percent share of the industry -- for one thing, this does no good as it opens the company up to monopolistic control charges; for another, that kind of share is unrealistic -- it only happened on the desktop due to Microsoft's proven unlawful business practices. 

Apple will continue to deliver the most advanced tablet devices at competitive prices, and will sell them in their millions. Some consumers may prefer/need less well-featured tablets, but Apple will maintain a leadership position. 

In time, Apple will diversify its tablet range in order to corner wider segments of the market.

I'm interested in what people think, and know this industry is changing fast. Please feel free to follow me on Twitter or RSS.    

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