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8/17/2012
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George Ou
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Fall Tablet Pricing Rumor Roundup

The impending price war among tablet makers will be bloody and fierce, but many of the rumors circulating right now about the iPad Mini, Android, Windows RT, and Windows 8 x86 tablets just don't make sense. Many are based on false assumptions, such as that Intel cannot compete on price. Let's run them through the BS detector.

As the tablet triad war heats up between Apple, Microsoft, and Google, speculation is running rampant on this holiday season's combatants.

Google fired the first salvo with its hot-selling $199 Asus Nexus 7 tablet and Apple is all but certain to close off the "price umbrella" with an iPad Mini. We've had various reports of the Acer Iconia W510 Windows 8 tablets priced between $400 and $800. We've had rumors swirling around a $199 Microsoft Surface RT ARM based tablet. We now have Lenovo hinting at $400 for its Windows RT ARM based tablet and $600-$700 for its business oriented ThinkPad Tablet 2.

Apple iPad Mini

Apple's iPad Mini will almost certainly fall between $199 and $399. The lower boundary of $199 is the price of the Asus Nexus 7 and Apple will likely be able to charge a premium over this pricing if it follows through with a thinner and slightly-larger-screen iPad Mini. The higher boundary of $399 is the price of the Apple iPad 2 and it's likely that the iPad Mini will be at least $100 cheaper--making it $299. But that leaves a $100 price umbrella that might give Google too much breathing room especially if Asus drops the price of the 16GB model from $249, which it has room to do. So it's conceivable that Apple will launch something between $249 and $299 as a starting price with various options and accessories quickly bumping up the price.

Microsoft Surface RT $199 rumors

Microsoft already has announced that the Surface for Windows RT tablet running on an ARM processor will sell at a price comparable to similar ARM-based tablets, which would put it at around $350 to $399. That's the price of the Asus Transformer Android tablet with 1280 by 800 pixel display. At $499, a Surface RT tablet with a WXGA (1366 by 768 pixel) screen, an app store in its infancy, and no ability to run Windows PC applications seems like a long shot against the Retina-based (2048 by 1536 pixel) third-generation iPad.

Then we have our latest rumor, based on a single anonymous source from Engadget, that Microsoft will sell a premium magnesium chassis 10.1" tablet for $199--which would have to be at a loss but which they could make up for with subscription contracts to Microsoft online services. This would not only go against Microsoft's public statements, it would also mean an outright war with Microsoft's hardware partners.

Those partners can't compete because they can't get Microsoft's Windows RT Operating System and Office 2013 license bundle for free. Microsoft makes almost all of its OS money from its hardware partners and it seems unlikely that they want to alienate them. Microsoft is well within its rights to go it alone in hardware like Apple, but it would risk an extremely lucrative business that sells hundreds of millions of software licenses a year, contrary to all the "post PC" talk.

Lenovo hints at tablet pricing

Lenovo's David Schmoock, head of North America operations, hinted that its upcoming Intel-based tablets running Windows 8 Professional will sell for $600 to $700 and its ARM-based tablets running Windows RT will sell for $200 to $300 cheaper. That suggests a starting price of $599 for Lenovo's business-oriented ThinkPad Tablet 2 which will likely be running Windows 8 Pro, the more expensive business license. It would also likely place Lenovo's Windows RT ARM based tablet at $399.

Some in the blogosphere have interpreted this to mean that Windows RT tablets will sell for $300, but that's stretching logic. After all, Lenovo can speak only to its own pricing and not tablets in general from other hardware makers. Not all hardware makers will sell Windows 8 Intel tablets for $600+, so it follows that not all Windows RT tablets will sell for $300.

Are $400 Intel-based Windows 8 tablets possible?

Acer has hinted at a price of $400 to $800 for its Intel-based Windows 8 tablets depending on the options. The $400 will likely be the starting price of an Intel Clover Trail SoC tablet running Windows 8 and $800 will likely be an Intel Ivy Bridge tablet with a larger screen running Windows 8 Pro. Some people doubt that Intel can be competitive on pricing but they're ignoring the facts. A brand-new Acer netbook running on Intel's latest Cedar Trail dual-core Atom processor sells for $228 at Walmart today. Last year I bought a nice 15.4" laptop for the living room with an Intel Sandy Bridge processor and Windows Home Premium for $268 so it's clear that Intel can and does compete on price.

When you talk about consumer-oriented tablets running the cheaper Windows 8 license, then $400 for an Intel SoC based Windows 8 tablet is absolutely possible. There are at least 20 hardware makers using this design and many will be competing fiercely on pricing. The bill of materials for an Intel SoC design will not be drastically higher than an ARM-based tablet. An Acer ARM-based tablet running Android sells for $285 at Walmart, so $400 for a Windows 8 tablet is very feasible and probably more profitable than Android tablets. Moreover, Acer will be able to up-sell a base station that serves as a display stand, a secondary battery, a keyboard, and a trackpad for a list price of $149. Asus pioneered this business model with its Transformer Prime and sells its base stations at a list price of $149, though the discounted street price is closer to $110.

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