Why Do Android Tablets Cost More than the iPad?

You know me.  I don’t own any Apple products any more.  I have:

  • HP desktop
  • HP convertible tablet laptop
  • Android cell phone
  • Sansa MP3 player

I can see the utility of a pure tablet given how much I travel (which I think is its optimal use case:  on the train/plane/Starbucks).  I’d like to buy an Android tablet.  With yesterday’s introduction of the iPad2, I am however left scratching my head.  Even before this, I was wondering “how in the world can the Android tablets be priced 20-50% more than an iPad?”  Hence, my list of the top 10 reasons someone would buy/pay more for an Android tablet.

  1. What’s an iPad?
  2. I’d pay anything to avoid enriching Apple.
  3. I work at Google…although Google employees may hold out until the holidays to see if they’re getting one free.
  4. Google Maps.  Oh, you mean I can buy a third-party GPS solution that is every bit as good and works off
  5. I’m too unhip to be let into the Apple Store.  (There are those who actually posit the Apple Store as part of the reason.  Apple doesn’t have to worry about retail margins so they can price below those who must support those margins too.  I don’t think this is an excuse, though it is a factor.)
  6. I hate waiting in lines to get technology products.
  7. I drive a Lexus and have gotten used to paying premium pricing for the same products.
  8. There must be a TCO argument in favor of Android, right?
  9. XOOM sounds so much cooler than iPad.
  10. If I’m stupid enough to buy an Android tablet right now, I’m stupid enough to pay a premium for it.

Truthfully, I really don’t understand it.  I’d expect Android tablets to cost $100 less than an iPad.  At least.  At current price points, they’re going to kill the market.  So, what do I think the real reasons are?  I’m stretching here.

  • They know Android isn’t really ready yet for the tablet form factor so they’re pricing it so only the really committed will buy in now.  Purposely keep the market away even while you’re dipping your toe in.
  • The various parties to the ecosystem are really that clueless to think that their Smartphone success will translate to the tablet market and that they can support comparable/premium pricing.

Honestly, I’m baffled.  If they’ve got me ready to buy an iPad, they’ve really accomplished something very bad.

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10 Responses

  1. Pricing will flip over the next few months – we’re only at the front-end of Android tablet market adoption. There will be significantly cheaper options and a much wider variety of products by year-end.

    Don’t forget that Android tablet manufacturers don’t have that 30% content subsidy Apple is planning to enforce – nor do they have Apple’s $50 billion in cash – so they need to make money off the hardware. Doesn’t mean you should buy an overpriced tablet – but it at least explains the pricing thus far.

    For now, Xoom, etc… is for Android fanboys only.

  2. You drive a lexus?

    And also, the 32 GB+3G iPad is only $70 (out of 800) cheaper than the XOOM. It does not come with 4G. Also, the iPad probably won’t come down in price… pretty much ever. The XOOM, I’m guessing, will.

  3. I actually think the retail theory that’s been doing the rounds holds a heck of a lot of water and is perhaps one of the main reasons, along with scale, why the Android tablets are currently not totally competitive on price with the iPad.

    It also means that the competing tablets have to sell a far greater percentage of 3G/4G enabled versions than the iPad, because that’s the only way carriers will subsidize it and makers can get full margin (WiFi versions will be subject to that retail margin issue).

    And of course the original iPad, which other than the cameras is at least on par with current Android tablets, is currently available for $399 at the bottom end. So the gap is even wider, albeit temporarily.

  4. No, Ben, I don’t drive a Lexus. Smart-ass kid.

    Chris and Jan, I think ultimately Google is going to have to subsidize the marketplace somehow. Relying on the carriers to sell the subsidized 3G/4G versions will work less and less as WiFi and WiMax coverage only continues to grow, making those devices more attractive and flexible.

    Wild card: Intel or ARM or Qualcomm. There’s precedent for this. Intel co-op marketing dollars for a LONG period of time was all that made many (most?) of the PC manufacturers economically viable. Take away the subsidy and they go away. They have a virtuous cycle with volume leading to lower costs and higher margins so they have the most incentive to drive higher volumes.

  5. Read on the FT, Apple’ designs its own CPU and other key components deriving a 7-10 margin advantage via deep verticalization. Microsoft orchestrates this strategy on the XBox. Interesting if Google / Microsoft adopt same practice . . .

  6. Its a well known saying that if you don’t like Apple Products its because you’ve never used one.

    Will 2011 be the Year of the iPad or Year of the Copycats, check it out at http://bit.ly/h6Oi4A

  7. Well…the first Apple product I used was in 1979. I still own an original, working Apple Newton. And a circa 1989 Mac laptop.

  8. It’s called vertical integration. Apple owns much more of its manufacturing and supply chain. It also doesn’t have to pay license fees to itself for anything. I suspect that the Android tablet folks are paying higher priced components to try to match Apple’s quality, and that is costing them more because they are all competing for capacity (which Apple doesn’t have to do) and then there is the expense of making Android their-own, which is an additional cost the Apple doesn’t have to include because it designs the entire experience from the start.

  9. Dan, certainly Apple has some supply chain and component advantages. That said, we have a chicken-and-egg issue here. To compete on price, the other vendors have to compete on volume and thus to do so, they will have to figure out who’s going to “support” lower pricing. Qualcomm may have to step up to the table, as Intel has done in the PC world, as may Google, who makes up money on increased advertising. If I were charitable, I’d say initial pricing is Motorola’s way of negotiating with their suppliers. I’m not so charitable…even while I think ultimately Google will have to stand up and further “support” lower pricing.

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