The future of the $200 tablet

You'll soon be able to get a lot more value for a lot less money.

Spending $150 to $200 on a tablet won't get you much these days: In most cases, you're looking at an off-brand Android product with a single-core processor, barely any RAM and a low-resolution, low-quality display. Depending on the device, you might not even have access to Google's app market or other basic services -- and while that approach may work with retailer-backed, limited-use products like Amazon's Kindle Fire, when it comes to more traditional Android tablets, it doesn't usually lead to the best user experience.

It's a stark contrast from what you get at the high end of the tablet spectrum, where $500 and up will buy you quad-core processors, a full gigabyte of RAM and eye-popping screens. Even midrange devices, which tend to have last year's hardware, are capable of delivering decent results. But once you hit that sub-$200 range, it's like you've entered a different dimension -- one filled with glorified e-readers and sluggish, subpar slates.

Get ready, though: That dimensional difference is due for a change. A major shift is brewing, and it could bring about the biggest transformation we've seen to the tablet class divisions. Put simply, budget-conscious buyers are about to get a lot more bang for their buck.

The tablet class shift

The first signs of the pending tablet class shift showed up in January, at this year's Consumer Electronics Show in Las Vegas. There, hardware maker Asus showed off a 7-in. tablet powered by Nvidia's Tegra 3 quad-core processor.

"One size doesn't fit all," Nvidia CEO Jen-Hsun Huang declared, citing the need for "different strokes for different folks."

Asus and Nvidia described a tablet that would run Android 4.0, a.k.a. Ice Cream Sandwich -- the latest version of Google's mobile operating system. An early prototype of the hardware featured a 1280-x-800-resolution IPS display; 1GB of RAM; micro-USB, micro-HDMI and microSD ports; and two cameras, including an 8-megapixel rear-facing lens. Hands-on reviews of the product were glowing: One blog touted the tablet's "blazing fast" speed, while another talked of its "bright, vibrant screen."

Perhaps most impressive of all, though, was the tablet's price tag: $249 -- a seemingly impossible cost for a device of that caliber. But this was no mistake.

"As we continue to see the volume of existing tablets increase, prices naturally come down on component cost," explains Nick Stam, Nvidia's director of technical marketing. "You'll see a number of devices coming out this year that will be lower cost than what you've been used to."

Indeed, $249 may be only the beginning. Rumors have been rampant that Google is working with Asus on a product similar to the 7-in. tablet introduced at CES, only with a price closer to the $150 to $200 range. Numerous reports suggest the tablet will run a "pure" version of Google's Android operating system, with no manufacturer modifications, and will be a joint effort between Google and Asus -- similar to Google's work with other hardware manufacturers when creating its Nexus and "Google experience" devices.

While Google representatives won't comment on rumors and speculation, the evidence is certainly starting to stack up. A quick search of the Internet turns up no shortage of purported leaks and insider winks. Sources close to the situation with whom I've spoken have discussed the project with a similar level of certainty, pointing to this June's Google I/O developers' conference as the time when the details -- and perhaps the product itself -- will be unveiled.

In a recent interview with The New York Times, Nvidia's Huang strongly hinted that an Android tablet running his company's Tegra 3 processor would debut this summer for a cost of $199. "We took out $150 in build materials, things like expensive memory," Huang is quoted as saying. "At $199, you can just about buy a tablet at a 7-Eleven."

The budget tablet strategy

So how are prices on such seemingly high-quality devices suddenly plummeting so low? While Nvidia points to falling component costs, some analysts suspect there's more at play.

"Companies just aren't making much of a profit off of these tablets," says Rhoda Alexander, director of tablet and monitor research for market research firm IHS iSuppli.

Alexander notes the success of Amazon's $200 Kindle Fire tablet, which -- while relatively limited in both performance and capability -- has sold exceedingly well. For Amazon, Alexander says, it isn't about making money off the hardware itself; it's about making it easy for customers to spend money with the company every day.

"Where they're making the profit is in the long term of bringing people into the Amazon universe," Alexander says.

Amazon's strategy is clearly winning people over: The company accounted for more than half of all global tablet sales in the fourth quarter of 2011, according to IHS iSuppli's estimates, shipping 3.9 million Kindle Fires and shooting past Samsung to become the world's second-largest tablet shipper for that quarter.

In the bigger picture, with the help of Amazon's product -- which runs a highly customized, almost unrecognizable version of the Android 2.3 OS -- Android's share of the tablet market is slowly but surely starting to rise. Research by market analysis group IDC (which is owned by International Data Group, the publisher of Computerworld) showed that Android owned 44.6% of worldwide tablet sales in the fourth quarter of 2011 -- a 38% jump from its position in the previous term.

Much of that growth came at the cost of Apple. The iPad maker, while still experiencing strong growth, dropped 11% in total market share in 2011 from quarter to quarter, according to IDC, coming in with 54.7% of tablet sales for the final three months of 2011.

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