Tickets to the tablet price-war

If you're considering buying any form of tablet device in the next month or so Australia, stop right where you are, put your wallet and your hard-earned cash back in your pocket and go and take a cold shower for ten minutes until you calm down and your lust for loot has vanished from your feverish brain.

I can assure you, if you ignore this advice, you will come to regret it in only a few short months.

Recently, a number of signs have gradually been building that Australia is about to face a tablet price war of epic proportions, waged between vendors like Motorola, Samsung, Toshiba, Acer, ASUS and other lesser rivals, who have all launched Android-based tablets locally in the past few months.

The first signs of the coming battle were felt in April, when Telstra, Vodafone and other retailers dramatically chopped the list price for the 7″ version of Samsung's Galaxy Tab line, first to $408, and then to $299, just a scant few months after the device launched for $999. The remarkable thing about this level of price cutting was both the speed at which it took place, as well as the nature of the device that it affected.

As we noted in our review of the device in November last year, the 7″ Galaxy Tab was no half-finished model with bugs and incomplete features. Instead, it was a stellar and high-quality product from a manufacturer with a solid reputation. Furthermore, it launched at a time when it had virtually no competition; it was the only challenger in a market dominated by Apple's iPad.

The chief complaint against the device at the time was the fact that it won't run the version of Google's Android platform specifically designed for tablets (Honeycomb). But our experience with Honeycomb in practice has led us to believe that the platform is just not mature yet; it's plagued by user interface inconsistencies. In comparison, despite the fact that many Android apps aren't formatted for the Galaxy Tab's larger screen, its mature Android Froyo operating system and bundled apps shine.

There are likely two explanations for the price cuts on the 7″ Galaxy Tab, then.

Firstly, it seems clear that the tablet hasn't sold as well as could be expected; certainly it has sold less than the six million units which had been shipped to carriers and retailers as at April 2011 (Apple's iPad has sold 25 million units globally since launch, as at June this year).

Behind this is the idea that it's likely that the Australian market was reticent to buy the 7″ Galaxy Tab because a glut of larger, more powerful tablets running more modern operating systems was slated to hit Australia this year, to say nothing of the second generation of Apple's iPad. Models like the Galaxy Tab 10.1v, Acer's Iconia Tab, the Motorola Xoom, Toshiba's AT100 and Research in Motion's BlackBerry PlayBook have all launched in Australia over recent months.

The problem is, as local analyst firm Telsyte has pointed out, most of these tablets have themselves launched after the iPad 2. With the crop of rival Android tablets having comparable features to the iPad 2 and similar prices, but a much diminished application library ... there is simply no consumer incentive to buy an Android rival, when you could get an iPad 2 for a similar price.

The need to differentiate the rival tablets from the iPad has already driven some pretty extreme promotions; with Telstra giving away three Motorola Xooms per day over a two month period in June and July this year. That's no less than 186 high-priced tablets in total — a pretty pricey promotion.

Internationally, industry luminaries like Nvidia CEO Jen Hsun Huang (whose company's chips power most of the Android tablets) are already throwing around the "price point" issue in public, and Australian and international analyst firms have started to do the same.

Then too, the 7″ Galaxy Tab is not the only tablet to have already been discounted locally. Earlier this month Optus cut the price of its low-end My Tab Android tablet to $99, down from $269, and Telstra's T-Touch Tab has also come down in price to $129, from an initial price of $299. "This could become the fastest-commoditized market in history," said Richard Windsor of Nomura Securities in the US last week. "The tablet honeymoon will likely be over in 2012."

In several months' time, with the first quarter of poor sales figures rolling in, it will become obvious to tablet manufacturers Acer and Toshiba that they are not going to sell enough units in Australia to justify launching the tablets locally. Furthermore, hype will have already begun for the next generation of devices — the iPad 3, a lighter, faster Motorola Xoom, the HTC Flyer — the list goes on.

At that stage, lower profile vendors like Toshiba and Acer, which still have decent product, will start cutting prices fairly drastically. After that point, Samsung's Galaxy Tab 10.1v will likely come down in price through Vodafone, and eventually even Telstra and Optus will be forced to chop their margins on the Motorola Xoom.

The Xoom has gone on sale through Telstra for the outright price of $840. I'd bet in September you'll be able to buy it direct from Telstra for $699; by Christmas it should be sub-$500. Which, given the price of the iPad 2 and BlackBerry PlayBook, is where it should have been to start with. By that stage, the Galaxy Tab 10.1v through Vodafone should be even less; and you'll be able to pick up a Toshiba or Acer unit for a song.

Of course, some tablets will maintain their price. The iPad 2, the BlackBerry PlayBook, maybe a high-end HTC model (given the company's now massive local presence in smartphones) and even HP's incoming TouchPad will likely maintain margin; all of these devices will have enough differentiating factors from their rivals that they'll be seen as a little more premium.

But for those who are a little more price-conscious ... sit tight for now. In just a few months you'll be having a field day.