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iPad 2 Forces Samsung To Reevaluate Galaxy Tab
An anonymous reader writes "Apple's iPad competitors are still spec-obsessed, and Apple's next-gen iPad coupled with the same price point is forcing Samsung to rethink its tablet strategy and pricing methodology altogether. The South Korean Yonhap News Agency relays a quote from Lee Don-joo, executive VP of Samsung's mobile division, about Samsung's upcoming Galaxy Tab 10.1 compared to the new iPad. 'We will have to improve the parts that are inadequate,' Don-joo said. 'Apple made it very thin.' Features aside, Samsung also finds itself in a bind price-wise. The upcoming Galaxy Tab model, complete with a 10.1-inch screen and Android 3.0, was initially going to be priced higher than the current 7-inch Galaxy Tab. Apple's iPad 2, however, is forcing Samsung to 'think that over.'"
This is awesome news. Competition is good for us!
but they aren't losing money on the parts.
Instead Apple is using it's massive cash reserves to buy 10 million of each part ahead of time knowing that they CAN sell them.
Samsung is only buying 2-3 million at a time. he who buys 5 times the parts you are is going to get a better price.
i thought once I was found, but it was only a dream.
This idea of "Apple making it back in the app store" needs to be squashed. Apple's financial disclosures make it clear how much money they make on the App Store/ iTunes Store. The profits are just beyond break even. Apple is and always has been a hardware company. Not only that, but they're now a hardware company that can leverage economies of scale with their suppliers.
The reason the iPad is so cheap is because Apple buys components to make it in bulk. In some cases they'll buy the entire output of a supplier. There are also documented instances where Apple have provided the capital for suppliers to expand their production facilities in return for buying the complete output of those new facilities. This is easy to do for certain items that get used across your entire product line, such as flash memory. Doing this means Apple can get parts at prices their competitors can't match, and in return they can sell their products for lower prices. When you have Samsung making and selling you flash memory at a price they can't match for their own subsidiaries, you know you're doing something right. It's amazing planning on Apple's part and a testament to the faith they have in being able to deliver on their product roadmaps. Whatever Chief Operating Officer Tim Cook is getting paid has clearly been worth it.
It is amazing how the conversation changes. I remember a year ago, there was a lot of people dumping on the iPad as overpriced, that they could get a more powerful netbook for hundreds less.
Now today, it is all about how is Apple making them so inexpensive.
Strange...
Its' too little too late. Don't even try to compete on specs, or other bullshit...compete on price and targeted use. Get a $100 capacitive touch screen tablet that is little more than a portable web browser...watch how many you sell. I'll take 3 today. Hell, I'll sell my ipad and buy however many I can with the proceeds.
Yes, it is very easy actually.
1) They have huge quantities of scale. While other manufacturers are making 100's of models, Apple focuses on a few. Easier to get great prices on millions of the same part, then to get prices on thousands of different parts with retooling in between.
2) That huge cash reserve? They are using it to hedge prices. For example they are pre-purchasing key components so that the manufacturer does not have to add in risk costs for unknown future prices. They are also sharing the cost of new manufacturing facilities as part of a contract to get better prices. Hard to compete when you can't buy components because they have bought up half the supply, leaving everyone else to fight over the other half.
3) The entire company is ran very lean, probably the biggest lean manufacturing company in existence. Since all their effort is very focused, they do not have the overhead that most other companies their size have. Check out their R & D spending versus sales. Incredible.
For those that think they are running razor thin margins to get iPad hardware sales to make it up on the back side, you do not know Apple very well. They make healthy margins on everything they do. They have even hinted that they could drop the prices on iPads if they need to and still make a lot of profit. They are a public company, check it their filings.
I do remember thinking that Apple simply had a glorified iPod touch. Then I tried one. Is the device "magical?" No. But it is a game changer, in more ways than people realize yet. I believe Apple has very big plans for this device, and the size of the case is just the tip of the iceberg.
Apple isn't hiding what they are doing. They are being very deliberate and open. In the iPad2 product release Jobs stated that they believe tech and art are not mutually exclusive. Their competitors are still all tech oriented. Even Google and Android is tech oriented. Most of the Apple haters here are still tech oriented and think that the art side just needs some flashy doo-dads and window transparency to come out on top. So it's not surprising to see so many people think that Android will blow the iPad out of the water.
Android tablets will come, but until companies realize that the consumer market really wants computing devices which don't feel like computing devices, they will simply be in a race to the bottom and Apple has already made it clear they aren't interesting in winning the race to the bottom. That said, their competitors need to keep in mind that as Apple's economies of scale get larger they will be pushing the bottom farther down.
It will be very interesting to see how the market responds. Windows on any clone isn't the target anymore. Now it's tight integration between excellent industrial design and user interface. I can't think of any company oriented to even start seriously competing and if Apple continues raising the bar every year like this then they will continue to lead the market space until someone can push the bar higher or until Apple brings a piece of crap to market.
"The avalanch has already started, it is too late for the pebbles to vote." -Kosh
Just to preface my comments, I may be an Apple fanboy, but I love Android too, despite what it may sound like here. At the very least, I want to see Android thrive so that Apple is constantly spurred on to innovate. Even better, I want to see it surpass iOS in all regards, because as much as I love Apple, I love good products better. Also, I, personally, don't get this whole tablet thing yet. I think they're great for some people, but I have no plans to buy one for myself anytime soon, since I'd much rather just use my laptop.
Moving on, you follow stuff closely. That's why you, quite reasonably, didn't expect Android to take off in the tablet market last year. Most people don't follow it as closely as you do. That's why there were quite a few people saying that it would happen.
As for pricing, if the competition is going to try and price their products at 80-90% that of the iPad 2, as you suggest, they're in a bad place. At those numbers, the price difference between the "normal" device and the "premium" device is small enough that plenty of people will make the jump. Low-end PCs are significantly cheaper than Macs, so they can make it up in volume by filling in at a price point that is far lower than Apple wants to go, but when going head to head against Apple in the premium market, none of them can hold their own (the last numbers I saw were that Apple had ~90% market share in computers over $1000). The same has been true in the MP3 player market as well, of course.
What really has allowed Android to be the exception is that Android has had a large retail and advertising presence thanks to the backing of the carriers that are using it to fend off market share advances by the iPhone's carriers (normal people don't actually know or care what Android is, so it certainly isn't because of consumer education and awareness, or even branding of Android as a platform). Those Android smart phones were being pushed heavily in their stores, oftentimes as a free upgrade, hence why it was able to pick up so much steam as a platform.
In general, however, iOS adoption is still much higher than Android adoption (see GigaOm from last October, and note also that Apple announced 100M iPhones and 15M iPads sold to date as of this last week), since Apple has their own line of retail and online stores that have been successfully pushing out iOS devices for years. They are leveraging those stores for the iPad 2, but Honeycomb tablet manufacturers have nothing like that going for them. Carriers aren't advertising on TV or making big displays of Honeycomb devices at their retail stores, Apple gets better product placement and treatment in stores like Best Buy or Walmart, and the manufacturers don't have their own retail chains like Apple does.
Not only that, but with the iPad and iPad 2 Apple is starting aggressively in terms of pricing, and no one has managed to make a device in its class that comes in at the sorts of discounts we see in the consumer PC space that allow them to sell in volume. Basically, they're trying to compete in the premium category without premium retail space, or, in many cases, even devices that could be reasonably considered to be premium in terms of build quality and features. And since they lack an ally that will use them as leverage against Apple, I don't see that situation changing anytime soon.