Hi, this is Steven Cherry for
‘s “Techwise Conversations.”
We gadget geeks sure do love the iPad. This past financial quarter, Apple sold 9.3 million of them. That’s well over half the tablet market. Although that’s down from 94 percent a year earlier-Android now has 30 percent of the market, 10 times what it had a year ago. Android tablets are getting plenty of love, too.
Is anyone else? This past year has also seen tablets from RIM, the makers of BlackBerry, and HP, which bought Palm mainly to build a tablet around its much-touted webOS operating system. In April, Sony announced it would be releasing a couple of new tablets this fall, allegedly optimized for videos and games. Rumor has it that Amazon, too, plans to release its own tablet this October.
But how much of a market is left after Apple and Android have divided the spoils of the tablet war? My guest today, Wayne Lam, an analyst with IHS iSuppli, has done a side-by-side comparison of today’s tablet designs. He is a senior analyst at iSuppli, which was bought last year by IHS. IHS is headquartered in Englewood, Colorado, but Wayne joins us by phone from Southern California. Wayne, welcome to the podcast.
Wayne Lam: Good morning.
Steven Cherry: You did what you call a tear-down comparison of eight different tablet models on the market today, including the first and second versions of the iPad. What did you compare, and what did you find?
Wayne Lam: Well, we looked at the-obviously the Samsung was the first to kind of follow quickly last year with the Samsung Tab-Galaxy Tab. However, that was a 7-inch format, so we kind of have to make an exception for it, because it was sort of an in-between device, it was both a cellphone as well as a tablet-sort of in between a smartphone and tablet. However, this year we’ve seen a little bit more concentration around the 9.7- to 10.1-inch format. So we have this year, first with the Motorola Zoom, which was purportedly the first LTE ready, 4G ready. Unfortunately, it didn’t ship with the LTE module, so that was an interesting bit. And then we looked at other competitors in the field, such as the BlackBerry PlayBook, the HP TouchPad, but also a lot of common PC manufacturers are getting into the game such as Asus and Samsung, also with their Galaxy Tab 10.1.
Steven Cherry: So how do they stack up?
Wayne Lam: Well, from a component level, the Android tablets are arguably more feature filled, meaning they tend to have on the spec side a lot more horsepower in terms of the apps processor as well as the supporting SDRAM, and also nice little features such as extra sensors and MEMS-based accelerometers, gyroscopes, and even barometers built into the device. But overall, it’s really a design that’s dictated by the usage case. And Apple’s kind of led the way in terms of teaching the market how to use tablets and what tablets are ideally good for. And in that sense it’s really more of a media content consumption device, and that really requires sort of an ecosystem of content and services such as the iTunes App Store, and, you know, partners such as Netflix and publication houses like Wall Street Journal, New York Times, to really bring that content to that device via applications. So it really is a sort of-beyond the hardware, it’s an ecosystem of application developers, content providers, and bringing all that to a device that really harkens to a post-PC type of environment, where the simplicity and the complexity of the operating system kind of fades away to really offer what the user wants.
Steven Cherry: So it sounds like Apple had two important head starts here. One was they were first to market with a tablet-the first iPad-but also, I guess, the really highly developed apps and iTunes ecosystems were a big advantage?
Wayne Lam: Yeah, absolutely. I mean, if you look at the development time cycle, Apple-Steve Jobs admitted that they started off developing a prototypical tablet even before the iPhone, so they had a good four, five years of development before they released a product. And even to this day their development cycles are pegged at an annual cadence, so they do invest a lot more effort into designing from the perspective of the user.
Steven Cherry: And here the OEMs [original equipment manufacturers] are the Samsungs and the Motorolas and the Asuses of the world. So are there any synergies-do they sort of learn from one another? Does this Android platform sort of benefit from this multiplicity of players?
Wayne Lam: I think so. I mean, you get a lot more diversity of learning, but somehow it doesn’t quite work as well, I think, in this case as it did in the PC world, where the PC was a nascent kind of brand-new platform. Here the platform, the use scenario is somewhat limited, but I think that some of the learnings that Google and the OEM partners have are definitely around how to best squeeze out the performance of the hardware that they have available on tap.
Steven Cherry: So it sounds like you’re kind of skeptical about whether BlackBerry and HP can catch up, since they’re not Android players. I’m wondering what you think of the Barnes & Noble Nook, and soon an Android tablet. Can a good e-reader maker move up into the tablet space?
Wayne Lam: The e-reader, I think, suffers from limitation of scope. I think Barnes & Noble has done a very good job of adopting a version of Android to work as an e-reader. It gives e-readers a lot more functionality and capability, but by and large all you’re going to do with that device is magazines and newspapers and books. And if-I don’t know what exactly Amazon’s plans are, but it’s looking more likely it will be a vehicle to distribute their content. But I think Amazon’s a little bit ahead because they do have content in movies and TV shows, so in that sense a presumed Amazon Android-based tablet may be more of a competitor to Apple.
Steven Cherry: Now, normally we would expect the Android makers to compete on price, but I gather that’s hard to do in the tablet world, and I guess the component analysis bears that out.
Wayne Lam: Right, right. And the tablets are a little bit interesting, the price points for the BOMs [bills of materials] are fairly similar, if you look at the comparative analysis, and it’s driven mainly by the display and the capacitive touch. Those two components alone could be anywhere from 40, 45 percent of the bill of materials, and the reason why is because capacitive touch is still a new technology, and the yields on that has been very very poor. I think first generation yields were 50 percent at best, and they’re improving that to 70 or so, but still nowhere near where you need to be to make it an affordable technology. And pioneers such as Foxconn have been complaining about that during their earnings calls. Another reason why it’s very expensive is that the display technology has to be very crisp and vibrant, because the tablet by itself as a use scenario-it’s right there in front of the user, so any blemishes and viewing angle deficiencies will show. It’s not like a laptop, where you’re a little bit arm’s length away; you’re right there with fingers touching the screen, so any type of degradation in quality, it shows. So what happens is the OEMs would have to basically invest in very good displays. And Apple started out with an IPS display, and all the other tablet manufacturers have pretty much invested in that segment, because it’s so close to the user, and that display can cost upwards of US $60 to $70 of the bill of materials. So it’s those two combination alone, the display and the touch screen, sort of limit the bill of materials from eroding over time.
Steven Cherry: So, just to be specific, if you have, say, a $500 tablet and, let’s say, the margins for that are maybe a third or so of that amount? Then we’re talking about more than half of the remainder is just taken up by the display and the screen, the touch screen.
Wayne Lam: Yeah, those are the two highest-cost components in the BOM.
Steven Cherry: And I guess people don’t realize that these displays on these tablets have about as many pixels as a good-size TV.
Wayne Lam: Yeah, they’re getting to the high definition. They’re all around 1000 by 768, around there, so it’s getting to a resolution of a HDTV.
Steven Cherry: Very good. Well, Wayne, it sounds like the tablet market is going to get even more complicated than it is for a while, and I guess that’s good news for analysts. Thanks for helping us sort it all out.
Wayne Lam: Oh, not [unintelligible].
Steven Cherry: We’ve been speaking with Wayne Lam, senior analyst at IHS iSuppli, about the future of tablets and why Apple’s iPad continues to lead the field.
For IEEE Spectrum’s “Techwise Conversations,” I’m Steven Cherry.
This interview was recorded 8 August 2011.
Segment producer: Ariel Bleicher; audio engineer: Francesco Ferorelli
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