Julian Yap

Apple just needs to put pressure on tablet pricing

Marco Arment writes:

The Kindle Fire and Nook Color are $199 and the iPad starts at $499. How far down can Apple push the price of the iPad 2’s basic design, maybe with only 8 GB of flash? $199 probably isn’t possible and $399 probably isn’t a significant enough reduction to change anything, but if they can get it down to $299, that would take a lot of wind out of the 7” tablets’ half-assed sails.

I think Marco is wrong with his price estimate if the iPad 2 was to continue (and I believe it will) when the iPad 3 is introduced.

Previously I wrote about how the "Kindle Fire represents the bottom end in tablet pricing":http://julianyap.com/2011/12/03/the-kindle-fire-defines-the-bottom-end-in-tablet-pricing.html. The Kindle Fire is a pure content delivery mechanism where Amazon actually loses money with each sale as the cost to manufacture each unit is greater than the actual price. Bear in mind also that a 7" screen tablet is a vastly different experience from the iPad's 9.7" screen size, not to mention the difference in manufacturing cost.

Apple does not need to compete at the bottom end of pricing. Apple just needs to put pricing pressure on the rest of the market while maintaining strong per unit profits. If they were to reduce the price to $299 they would also devalue their product and cause a public relations nightmare for customers who had only recently purchased the iPad 2 or received one, say for Christmas. Seriously, a $200 price drop? Don't forget too that the iPad 2 is still insanely popular and seen by a lot as a PC alternative so there is there is no need to reduce the price just to inflate volume.

I think reducing the price of the iPad 2 by $100 to to $399 would be a good compromise.

18 JANUARY 2012 @ 12:05PM

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