The free-fall in PC prices in the 90s "killed" the PC, except that every major PC manufacturer still sells high-end models, and retailers still make money on them.
The free-fall in automotive prices in the 20s "killed" the automobile, except that people kept buying faster, sleeker, newer models anyway.
Like so many other electronics and everyday devices, the commoditization of tablets won't "kill" the tablet. It will result in a glut of disposable, troublesome, irksome devices, but there will still be a very nice market of people willing to pay more for a better device. Go make money there, you'll be happier anyway.
Came here to say exactly that. Markets are zombies and dollars are brains. But the title is less thrilling than "Ok everyone knows how to make a tablet now, that won't be a high margin business." In this case margin being the proxy for expertise in putting together a tablet.
But there actually is a story here which VentureBeat came so close too and missed, the cost of compute.
Even in the 80's when I went to work for Intel people 'in the know' thought it was insane that Intel could capture 33% of the value of a PC with just the CPU + chipset. They worked really hard to make that the case, using every gimmick at their disposal, from patents to copyrights to support contracts to outright strong-arm tactics. Even today that survives in the $300 you pay for the CPU on the motherboard. Mostly it was about the software base though, you really couldn't do anyhing about it unless you were willing to bite off on the problem of the software and tools. Apple did that, but nobody else did.
ARM is different, the ARM folks take their tax, but you can buy out their tax if you know you are going to sell enough chips, and the cost to make chips has gone down. Even though the cost to build chip factories has gone up (remarkably so). I'm not nearly as engaged with this problem as I once was but around the turn of the century the 'sunk' costs of doing a chip was on the order of 5 - 7 million dollars. A wafer start (with anywhere from 1 to 12 300mm wafers) is like $48K [1]. Less on the older processes, so may $1 base cost per tested good packaged die. So you if you price to cost + margin there was a huge amount of room below the Intel x86 artificial cost 'floor'. ARM software has gotten better and with Linux and then Android creating volume, additional players entered the market. And some, like All Winning have very modest margin targets on their CPUs, others like BroadCom/TI/QualComm have been playing in the smartphone market where these CPUs don't carry as much margin as general purpose compute devices do. You need look no further than the Raspberry Pi to see what that means in terms of consumer cost.
Anyone can become an ARM cpu vendor, its damn difficult to become an x86 compatible processor vendor. And that is the story we're seeing play out here. From the sidelines I'm watching to see what Intel does next, they are already scrambling (see the Cedar Trail stuff) and they have a lot of smart folks who can do great stuff with manufacturing and architecture. For the first time since the Motorola 68000, they have legitimate competition.
Is it mine in the sense that it spewed out of my keyboard without much forethought? Yes. But the concept that markets are an unkillable mechanism that seek out money is universal.
What about AMD, should they copy ARM business model to compete with Intel in desktop market? Or maybe AMD is too similar to Intel and cannot adapt ARM licence model due to its internal costs structure? (Innovator's Dilemma)
AMD is a good example of how competing with Intel doesn't work well. They kicked Intel's ass with the AMD64 architecture but they didn't get commensurately rewarded.
Look at their lawsuit vis-a-vis Intel and their predetory approach to Dell. They accused Intel of threatening to cut off Dell if Dell put an AMD chip in their servers. At NetApp where I was arguing for Opteron rather than the turd Intel was pushing (Itanic) as a 64 bit solution I got to see all of it, the whole "We might not want to buy your products ..." or "We really only provide NDA roadmaps for our 'comitted' customers ..." etc. Not so with ARM vendors, there isn't anyone to cut your leg off. Don't like the TI part? Hello BroadCom! Can't get docs on their GPU, hello Exynos! It's competitive and its easier to play in.
Tangentially, because I'm finding your comments so fascinating: it looks to me like AMD doesn't really know how to compete with Intel from a technical standpoint in the desktop and server space, but their default approach works much better in the cheap and ARM space.
For example, AMD seems to have bet a lot on their bulldozer architecture, but as far as I can tell it's been almost a total flop in the space where Intel really dominates. Even aside from the OEM space, system builders like my hardware guy look at options from Intel and options from AMD and, currently, go with Intel every time (which is a shame, I personally would like to see AMD giving Intel a rough time).
So what's your take? What happened with Bulldozer? Does AMD have the technical chops to beat Intel?
As an OEM stepping away from Intel is a very risky thing to do. Intel executes really really well, AMD does not. Intel lives and breathes process technology, AMD does not. Intel has discipline to walk to the end of the road, AMD does not.
Using a software example, if you notice the guys who write the gaming engine put out technically better games than the people who license the engine? I attribute that to the ability to internalize all of the benefits and weaknesses of the engine. If you license the engine you 'kinda' know what it does but because you don't have to know your knowledge never gets deep enough to do what the originator can do.
AMD competes against Intel on architecture, and they do Ok at that, but they cannot compete on process. You will notice they gained server share on Intel when Opeteron released because Intel was caught sleeping (they had targeted Itanimum 64 bits, Pentium/Xeon 32 bits, 8051 Etc for SoC/embedded. They were resisting putting 64 bits into the Pentium because it would cut into their already weak Itanium story. As long as they stayed there, AMD gained ground. They capitulated on architecture and then retook ground using process improvements (TDP mostly), meanwhile AMD didn't cement their lead, rather their CTO left and they played dancing CEOs. Boat stalls, momentum is lost.
So no, I don't think AMD can beat Intel organizationally and that will keep them from beating them technically.
AMD put a lot of resources toward the desktop. And from all the benchmarks I've seen they achieved their goal. Bulldozer is a pretty competitive desktop processor. Bulldozer is powerful.
But not energy efficient. There can be no Bulldozer laptop.
And the world switched to laptops. Right now the split is 18% tablets, 60% notebooks/netbooks, 22% desktops.[1] And desktops are losing ground rapidly.
AMD simply has nothing to compete with Intel in the laptop space.
For the same price, Intel scores something nearly double on the benchmarks (1700 for a4-3400m vs 2900 i3-2350m). For everyday computing in the real world, that performance difference is:
AMD: "This is so slow I want to tear my hair out."
Intel: "The CPU is no longer a bottleneck.
I need a new SSD for CPU speed to even matter."
And the Intel chip does all that using SO MUCH LESS power than the AMD (a4-3420m=35TDP and i3-2350m=15TDP).
And as you move up away from the budget laptops on the price/performance curve, things rapidly get worse for AMD.
AMD's failure was strategic, not technical. Even if Bulldozer had been 50% faster, AMD would still be on the verge of irrelevance.
"The King is dead, long live the King." refers to the accession of a new monarch. It implies in the language an immediate, uninterrupted rule of the line.
It should not be used when something has died, and it's just dead and there is no implied line of succession.
A terrible but relevant example would be "the iPhone is dead, long live the iPhone.", implying that the 4s is dead and 5 now reigns.
The conclusion of the article was "Profit margins from hardware-only is dead. Long live profit margins from software bundled with hardware!" The example was the generic Android tablet vs. the iPad.
But what the phrase really means is: "X is Dead, Long Live Y"
with x being the diseased king, and y the rightful heir and new king.
As wikipedia states [1]:
The phrase is a traditional proclamation made following the accession of a new monarch
And...
"Given the memorable nature of the phrase (owing to epanalepsis), as well as its historic significance, the phrase crops up regularly as a headline for articles, editorials, or advertisements on themes of succession or replacement."
That's why bigdubs was right.
But finally... most probably the successor and new monarch could be something like what Ballmer said to The Seattle Times [2]:
I think when you look forward, our core capability will be software, (but) you'll probably think of us more as a devices-and-services company.
Devices+Services is the new king. Google, Amazon, Microsoft, Apple, are all going this route.
Yes - that's precisely what the original poster was referring to. "Hardware (The old, legacy, big manufacturer, high margin, centrally built) is dead, Long live Hardware (The new, on-demand built, small manufacturers, lower margin, distributed build).
I'm sure there will be many more generations of hardware as well - indeed, the next big generation will probably be some form of print-at-home, then perhaps biological - who knows.
There will be many iterations - but they all will consist on something physical replacing the last generation.
With that said - I appreciate your meta-point, that the concept of "Selling Hardware Alone" without the devices/services associated it, is going out of vogue with the highly-valued companies here in North America. Point made.
Except that the iPhone 4S (and iPhone 4) - are very much alive. I'm sure if we look we can come up with a relevant example - but, regardless of how we look at it, the meta point "The old reign is gone, but the new reign begins, ensuring uninterrupted persistence" - is quite likely true of hardware. Every generation or so, the themes associated with hardware will die, but they will be replaced with new ones.
Have you read the whole article? The author is not disagreeing with you. He is very specifically agreeing with your point. Apple is selling more than just "hardware", they're not just selling a piece of metal and silicon. That's what the author is saying is dead. Doing what Apple does, selling hardware + software + brand, is what's still alive.
So you and the author are not disagreeing. What he is saying is not that no one will ever build a tablet again. He's saying making money off the hardware alone is a bad idea. And that you need to sell more than that to make a good profit.
I used to work with jewelry, you could make the same argument that selling rocks is dead. But if you put the right branding, and tell the costumer a compelling story. We could literally sell a product for a 10x~20x profit margin. And yet, selling rocks is dead. Selling jewelry isn't.
Actually Intel's ultrabook rebranding was also a clever step to make laptops expensive/more profitable again, while they were in a free spiral fall due to (Taiwan's)Acer's netbooks. That said, hardware will only be dead if US companies give up on producing hardware, and it becomes commodity produced elsewhere, similar to clothing manufactured; only Apple will remain the Prada of hardware.
Add a keyboard(/trackpad?) case to one of these 7" tablets and you pretty much get the original Asus netbook concept, only faster, cheaper, and more versatile.
And if you remember the CeBIT where ASus abortively introduced an ARM based laptop you got to see the who ecosystem in action. I wish the full details of that came out but the scuttlebutt was that Microsoft threatened to cut off Asus completely if they shipped it. They were already pissed that the EeePC's had a Linux distro that was easy enough for windows users to use but couldn't really put Vista on them, their re-issue of XP to support those machines was pretty notable.
I have a NATPC009S with a $10 USB keyboard/carrying case and it works great for what it is. Not in any way an iPad (or Google Nexus) competitor of course, but at a fraction of the price it's perfect as a "won't worry if this breaks/gets lost" device thrown in my bag for casual use coupled with emergency ssh access when a server goes down.
>>The free-fall in PC prices in the 90s "killed" the PC, except that every major PC manufacturer still sells high-end models, and retailers still make money on them.
Yes, but how lucrative is the market in general compared to before? How many new players do you see, and how much innovation is happening?
I've always been of the opinion that commoditization is good for the consumer only in the short run (since prices drop). In the long run, it hurts the consumer because there is very little if any innovation in commoditized markets.
A lack of groundbreaking innovation leads to commoditization, not the other way around. A commoditized market is ripe for new innovation to set an offering apart—and if that innovation is big enough, it may just end up creating a new market.
The feature phone market was pretty commoditized, but that didn't stop people from trying to figure out ways to create a new, less-commoditized, market by making phones smarter. And touch-based smartphones, too, will become increasingly commoditized until someone comes up with another revolution.
Similarly, the basic functionality of a car has been commoditized for decades, but competition keeps innovation going.
Other than PCI, PCIe, USB, Bluetooth, discrete 2D graphics cards, 3D accelerators, multi-core x86, DDR, SSDs, High quality LCDs and hundreds of other improvements it is worth saying has you do, Reg, 'What has commoditization ever done for us?'
Incremental improvement is not innovation. Very few of what you listed made a big enough difference in the status quo that I would qualify them as innovation.
Yes, Bill Gates vision of one computer per home was wrong: now we have more than three computers for every family member (notebook, mobile, tablet, e-reader)!
I've already started sticking them to the walls of my house to control lights, the thermostat, the garage door etc. This didn't make sense at $400/device but as soon as they hit $100 or so the game was afoot. Now they're so cheap, its literally cheaper to grab one from "the pile" and whip up a nice html5 interface for the task than to buy a dedicated Insteon controller or Nest thermostat. Hell, it was cheaper to automate my garage door and give it a REST interface on the web than to buy a single new clicker at Sears.
I'm guessing that in the near future there won't be many surfaces left in our lives that aren't festooned with touch-screenage.
This is one of the reason's I've spent so much time on Blossom[1], which brings iOS-style development to HTML 5 (Quartz drawing, Core Animation-style transitions, etc.).
Eventually, these devices will be everywhere, and all of them will need quick-to-build-and-deploy interfaces, that perform well and are consumer-friendly.
Blossom runs great on my iPad and Nexus 7 -- smooth, fluid -- and development and debugging is easy with Chrome.
Anyway, I think you hit the nail on the head on how these low-cost devices will be used in the very near future.
Which is to say: what's truly dead is the single-purpose electronic device.
Modulo reliability and/or battery life / power consumption. Power draw on single-purpose devices can be very, very, very low. It's going to be a while before you can power a tablet with a postage-stamp sized PV cell or thermocouple. But 1-800-YOU-WILL.
I'm curious how much time / hardware hacking was necessary to implement your own thermostat or garage door controller. The garage door controller seems like the simpler of the two to reverse engineer, but a thermostat has a number of inputs to reverse engineer unless there is a documented/standard api of sorts.
Also, where are you sourcing cheap touch screens 'from the pile?'
Ah. I mis-understood you on the touch screen part. You made a web interface that you access via cheap tablets. I was thinking that you were replacing physical switches with wall-mounted mini touchscreens.
Yes. That's really where the magic comes from. We've had model controller and view smashed together poorly in single purpose devices for so long, it takes a bit of a mental reorientation to understand that a light switch even has a M, a V, and a C.
Once you do though, you get the awesomeness of programming together your lights, security system, and garage door opener into one view with a software "controller" that can open the door, report its state and turn on the lights with a button press. Then you can put that button on any wall, phone or whatever. If you want to create the functionality of merely replacing a switch with a little touch screen, you can, but that's just one instantiation of the many that become possible.
What hardware are you using? I've wanted to try home automation for a while but all I can find is either the lowend stuff (X10) or the really highend stuff that requires a dealer to install it for you.
I don't think original parent did away with the hardware components.
X10, Insteon etc also sell software to manage their devices. That is not cheap. That s/w is probably what he replaced.
I did a small bit of home automation myself. I went with X10 (for low cost). I strongly suggest you do that too.
I set up an intrusion alarm system. I have multiple wireless (RF) door open and motion-detection sensors. I use a RF-to-USB X10 device to receive these signals on my Linux desktop.
My shell/Tcl scripts interpret this data and send email and (SMS via AT&T's email-to-sms gateway) if the alarm is triggered. They also turn on many lights and play an audio warning message, and turn on a webcam and start streaming the video to a remote server. :)
Since my house wiring is ancient, Insteon won't work in my house. For the same reason, ground-level sockets can be controlled by a plugged-in X10 controller, but not wall switches.
I have an eclectic blend of old X10 and Insteon devices. I've got an antique serial interface for querying and setting the statuses of the modules. The shipped software was win3.1. The hardware control devices were awful. Hooking the serial device to my home server and writing a restful web app with control screens for various tasks for use with my smartphone and junk tablets scattered about was magic.
I also replaced a thermostat and the ridiculous "mainboard" in our home security system with beaglebone boards.
I've been working on that stuff for years. The missing part was always a cheap, always on touch screen device to give it a reasonable interface. The day is finally here. I'm really excited about the kindle paperwhite for this purpose.
Something that isn't often considered for home use is DMX-512. I use DMX to control lights with the Nitrogen Logic automation controller. It has the lowest per-channel dimming cost of any system I've found (cheaper per light even than X10 and Insteon dimmers), but requires home run wiring.
Using my libdmx485[0], you can control a DMX network very easily using a highly affordable FTDI USB-to-RS-485 adapter, or (shameless plug time) you can buy a Nitrogen Logic controller if you don't want to write your own software.
I've been wanting to get into home automation too. My biggest fear is vendor lock-in. I'd like to hear more about how he gave his garage door a REST API, because that's something I could build my own interface for.
Looks like its been discontinued but I'm sure something like it still exists. I probably payed the $20 retail for it. Thus my judgement that it cost less than a new clicker from Sears.
The garage door has a sensor that's part of the security system, which was replaced by a beaglebone. Between the two systems, I can use the main server to program a small app to GET the state of the door and PUT the door into the open and closed state.
Of course, the next step is that the massive proliferation of panel displays all over everything will make them tacky and gauche. Look for first class seats and high end luxury cars and nice hotel rooms to begin deleting screens, since their absence will now be luxurious...
"At these levels there is almost no profit margin left in the hardware business. A $45 tablet is cheap enough to be an impulse purchase at the check-out line in Best Buy. A $45 price puts tablets within reach of a whole host of other activities not traditionally associated with computers. Tablets could be used by waiters in restaurants."
I've been to plenty of restaurants where waiters having been using handheld, wireless devices to take orders, so that's nothing new. And claiming that a rapid price drop means there's "almost no profit margin" and then equating that to the death of hardware seems completely upside down.
If hardware manufacturing has dropped to the point where complex devices are cheap to buy then we are entering a golden age of hardware since it means that manufacturing and design process has got cheap enough that many things that were previously too expensive to design/manufacture will be made.
It can also herald an era of 'mom and pop' hardware companies.
"... then we are entering a golden age of hardware ...
It can also herald an era of 'mom and pop' hardware companies."
Exactly!
I never understand bloggers and pundits who analyze these things from the perspective of the stockholders or owners of the large players instead of the consumers/small players.
Why the hell would you cheer about the high margins charged on the products you are paying for? Is marketing getting so good that consumers are now complaining about too much competition among those they buy from?
Why the hell would you cheer about the high margins
charged on the products you are paying for?
I don't cheer high margins, but in some industries cheap medium-low quality products crowd more expensive higher quality products out of the market.
Consider inkjet printers; there are many cheap products on the market, but the consensus opinion among techies seems to be that there's no suppler with a good product.
It would be a shame if more of the technology industry went in that direction.
I'm not sure inkjet printers are a good example, although you can say that since the cheap printers flooded the market there are fewer "good" printers and they lost the economies of scale so they are more expensive.
This example is so polluted by the whole ink cartridge "sell the razor blades" business model and the legal challenges around 3rd party cartridges that I would be very hesitant to generalize from the printer example.
With that said, the kindle business model is that same model so maybe there is something to it.
More referring to the general trend, even among commenters.
This is not a perfect example, since you can make the argument that the audience is other investors who want to some trend forecasting and have a generally conservative mindset.
But it does bring up another possible reason for this behaviour: for those with a stake in maintaining the status quo it now makes sense to attempt to fight commoditization through marketing/lobbying disguised as journalism now that ethics in journalism is ebbing and the cost to publish a blog is low.
I personally think it's a result of the success so many brands have had in tying brand choice to personal identity and tribal affiliation, but that doesn't apply to the writer of this piece obviously.
It could also mean that "mom and pop" companies can no longer get into the hardware game at all. If there is no margin for hardware sales, only companies that can afford to setup the manufacturing processes and operate them at little, no, or negative profit will be able to stay in the game. This means only companies like Apple, Microsoft, Amazon, Google, etc. who can afford to support mass hardware production with software sales, will be able to compete in the hardware market.
Also, it's interesting that he brags about his research in China without mentioning what this means in developing economies. China still has huge segments of the population that do not own tablets, not to mention India.
Meanwhile in the developed world, tablets could become as ubiquitous as signs.
Being a mechanical engineer and a hardware guy myself, I may be biased, but I think hardware is alive and well. With rapid prototyping and open-sourcing of 3D printers, fabrications shops and the like, the opportunity to create new hardware devices is easier now than ever before.
The issue the article focuses on is commoditizing of hardware. Tablets all essentially have the same components and the economies of scale are exaggerated. When you have multiple manufacturers of very similar devices they all start reducing their margins to gain market share. This is a race to the bottom, and I believe the point the article is trying to make.
However, the innovators of hardware are the winners. New devices that create new markets, new functions, new possibilities for consumers have the potential to sell large volumes at high margins. This has the advantage of the added barrier of manufacturing. Competitors take longer to tool-up and compete, giving first-movers a larger advantage than software producers. The iPod, for example, still remains the leader to this day.
Hardware isn't dead, it just becomes a commodity over time. To avoid reaching the bottom, you have to be a company that's always innovating, just like software. Creating new products, vastly improving design, etc. Leave the copycats in China to turn it into a commodity, you should be onto your next big thing by the time that becomes an issue.
The generic cheapness that may portend the death of hardware is the same force that is causing a renaissance of hardware hacking.
Most major cities have hackerspaces or techshops (http://www.techshop.ws/) where you can 3D print and use CNC mills. It's not uncommon to take apart cheap hardware and hack something into it (failure is much easier to stomach on a sub-$100 device).
Arduino has been the main driver in this area for years, but mark my words: Go on Raspberry Pi is the hardware platform of the future. Go is close to the metal and has great concurrency, which make it ideal for interfacing with sensors. No more dealing with Arduino's lack of real threads and the weird sketch format.
good point. I'm pretty happy that hardware hacking is potentially becoming mainstream again, hopefully it makes complex hardware design seem less and less like an ivory tower affair like it has for the past 20-30 years.
I've worked in the industry at a chip startup, and it's one where people hold on to stacks of internal design books across companies because the information is very niche and protected.
As far as the commoditization of consumer hardware, everyone in the industry knows about it, and they're responding by investing more by offshoring, or focusing on higher-end industrial markets. Hardware/chip startups are increasingly rare (or are very underfunded) unless they offer a significant game-changer due to the capital costs involved.
A $45 knock off tablet, bought in China miles from the manufacturer doesn't equate to a $45 price tag in the USA. Put a brand name on it (and some quality control), put in the 8 or 16gb the market requires (this tablet was 4gb) and shipping and import fees, and you're easily up to the $200 we're paying today.
My current tablet is a NATPC M009S (also sold under about dozen other names) 7" Android 4 tablet with a 1.2GHz Allwinner A10 CPU, Mali GPU, 1GB RAM and 16GB internal storage (expandable to 48GB via microSD). It is available for 100,- GBP ($138) on Amazon in the UK. The 8GB model is available for $130. A newer model with 1024x600 screen is available for ca. $160. Forgo HDMI output (and get a slightly cheaper feel case) and it's down to $100.
Not quite $45, but also well below $200, even in the UK. These are highly usable, even the cheapest one mentioned, though of course not comparable to a high end tablet. And they've been eating their way steadily down-market over the last 6 months. Give it another 6-12 months, and they'll likely reach the price point on the low end, and start getting specs "good enough" for most casual users on the "high end" ($150).
Same time last year, the "high end" for these tablets were 256MB or 512MB RAM, 4GB storage or so, Android 2.1 and resistive touch screens, in the $150-$200 range.
And this is a non-post. First, hardware is typically more expensive here in China (components make up much of the cost, which are imported into export-only zones, VAT is high), so if they are selling them for $45 in China retail, I'd expect them to eventually be the same price or cheaper in the states. Second, its not a knock off tablet if it doesn't claim to be something it isn't (like an iPad). The branding is very white label.
More like $75-100 in the US. Search for Allwinner on Amazon, filter to fufilled by Amazon/Prime items, and there are a few offers for 7" tablets and mini PC's. I just got an mini PC that I'm going to play with tonight (assuming it actually works ;) )
For 30 years, companies have extolled the virtues of globalization, while jobs were moved overseas and shareholders reaped the benefits.
Now, finally, we're starting to see the consumer aspect of globalization. If I can buy a tablet for less than it costs to take my wife to dinner, technology is truly within everyone's grasp.
2 thoughts:
He isn't saying anything except "margins are razor thin". Hardware companies have made money on razor thin margins in the past, and will continue to do so. Razor thin margins don't mean "0 margin".
He seems to be ignoring the costs of distribution. The reason the tablet is $49 is because you can walk to the factory from where it's being sold. Try to take advantage of that price and import it to the US and you'll find the cost is higher. I don't see why it's amazing that you can buy a cheap tablet at wholesale prices, that's obvious
Distribution is usually via Hong Kong at something of middle man markups, but still cheap. The last time we ordered this way, the item arrived declared for customs as 'Contents: Gift'. I'm not sure what the preferred weight limit is for them.
There's a sea of knockoffs over there, some terrible, others very good.
One thing that's interesting about China is there are literally 10s of thousands of independent manufacturers. In the U.S publicly traded companies raise and borrow money for incredibly cheap and buy out and consolidate everyone but in China this doesn't seem to happen.
Traditionally, editors and subs write the titles. Many online news sites ape the model that preceded them in the print world (except for the part about employing editors with a talent for actual editing).
Totally agree, but from my understanding it's often the editor that decides the title, rather than the author. I'm sure that depends on the publication, though.
A low price point on commodity hardware certainly doesn't correlate to the hardware industry being dead. If anything it is quite the opposite. With such a low price point, the potential market opens up quite significantly. There become many more people that can now afford a tablet, and there also becomes many that can justify having a few around the house for various tasks. A tablet in the kitchen for just recipes becomes a viable product. Of course I would want that particular tablet to have some particular features. Maybe water proof, and easy to clean.
On the opposite end of the spectrum, you do have the Apple's and Amazon's of the world that the author mentioned. Quality/expensive hardware will continue to exist long into the future. It will help drive the advancements in technology, and a portion of consumers will always demand quality regardless of price.
If anything the low price point opens up the market for new products. Take Ouya as an example here. While they managed to get $8.5M on Kickstarter, their initial outset had them need less than $1M. I would argue, and I think I have here that we are on the brink of a cambrian explosion of new hardware devices, and given the low entry point, there will be many new companies that bring us exciting new products.
Your implied negative standpoint, with the products are "cheap" and "generic" and "Chinese", is rather naive and amusing. The entire point of this article is the fact that these products are indistinguishable from the same ones with a HTC, Samsung, HP or Apple logo emblazoned on the device.
Hardware will truly be dead when people realize just how much they're paying for the brand name and nothing more.
As noted by another post above, take one of these products, bump the specs to something tolerable (say, 16GB instead of 4GB etc.), do some real quality assurance tests/screening, ship it halfway around the world, put a reputable name on it (so customers can trust they're getting something worth getting), add a sensible markup, set up a tech support hotline, and that $45 slate is now $200 - right about where decent tablets are now.
"brand name and nothing more" isn't nothing. It's why people pay Apple $649 for an iPhone 5 consisting of $167.50 in parts - there's more to a product than just parts, there's assuring you'll end up with more than just $167.50 in parts.
I wish that were true...but look at the fashion market. It seems a portion of the populous will pay for brand name goods at a premium that keeps these brands at the top. I suppose that's why Goodwill exists in accounting.
Heh, I see a LOT of Android 2.2/2.1 and even a few 1.6 devices on that page. Most of the ones claiming 4.0, if you look closely at the pictures, it's not the 4.0 interface (some of them have the old search bar from the 1.6 days). I don't know if the pictures are just wrong, but I certainly wouldn't trust them with my money.
The few that did claim 4.0 and did have accurate pictures, the specs were pretty poor and the price wasn't that low.
dealextreme really aren't at the cutting edge of things in this market. They are trading on the fact that they have 'brand-awareness' and trust and that people assume they are the cheapest. Reality is they have a bunch of out of date stock that people in china wouldn't buy.
If you want to explore this wonderful world, i'd look at the manufacturers first. Ainol (worst name ever) are the dominant force in the market IMO. The novo-7 fire is basically a nexus 7 with a microSD slot, for (in the west) ~60% of the price.
Anyone know of any good review sites useful to someone interesting in buying some? I imagine there is huge variation in quality among the tablets on that page.
There really aren't any proper reviews of stuff like this; there may be some by people on YT that scratch surface, but there can be small issues that don't get a mention[1].
Your best bet is to ask on android tablet forums, and/or stick to the most common devices (eg. ainol).
To be honest i would say get an ainol novo7 elf2/aurora2 (tn/ips), or a used v1, or an a-n-7 fire, which is like the nexus 7 but uSD.
1. eg- i had a tablet that didn't autorotate, despite having all the right sensors, and also that made electronic noise with the headphone port (only) when nothing else was going on for a while.
Someone ought to try the Allwinner tablets before trashing them. There's nothing wrong with them. At all. That SoC is also powering an enormous number of jumpdrive-sized Android sticks that turn your TV into a big XBMC-capable screen.
It's mesmerizing to take one of these sticks, plug it into a TV and then Airplay/uPnP-play content on it from my mother's phone, or my Dad's desktop/server PC, or my phone/tablet/laptop, and have everyone's phone instantly be a remote for it.
I live nearby Hua Qiang Bei in Shenzhen, if you are serious I could ship some for you. I'm actually seriously considering setting up a Hua Qiang Bei e-commerce: this place is really a gold mine for electronics.
Hardware isn't "dead", but companies that sell commodity hardware certainly don't have a bright future. Margins will be razor thin so unless you have insane volume or can manage your supply chain like a boss, then exiting now might be the best long term plan.
Similarly if you only produce Operating System software you are also "dead". Once the long extended death rattle of the PC compatible system is finally over there won't be a large common platform for third party companies to target. Even Microsoft sees the writing on the wall with this one hence Surface.
So to ensure survival a company needs to be in control of the entire widget, both hardware and software to produce the best possible system. This will yield a diaspora of almost but not quite compatible devices running a variety of different software platforms. Some will be open source, some will not. Some companies will survive the transition, most will not and new companies will rise and take their place.
So what he's saying is there's room in the market for a software company to take these $35 tablets(in volume), add custom software enhancements, and sell them for $200? Sounds like a business opportunity, if maybe a bit short lived.
Also, why has nobody pointed out the opportunity in taking these and making custom software for various industries like Medical, Automotive, Automation (home or industrial), Sales (of various things).
Custom software on disposable hardware could really turn into some big money businesses. Maybe there's no money in the hardware, but you can add some serious margin by bundling it with custom software and maybe add the tag "enterprise" if you want to sell to large companies.
I think he has it backwards. Hardware is getting cheaper, making it easier to sell products that used to be too expensive. The cheap labor in China is fairly accessible to everyone.
This is an opportunity, not a death blow.
$0.99 Apps didn't 'Kill' software for the same reason.
Let's make an important clarification here: When the word "hardware" is used in this article (and this thread) it is really to mean "commodity consumer hardware". There's far more to the hardware business than what you can buy at BestBuy or Walmart. That said, even industrial and specialty hardware is under pricing pressure in markets where reasonable volumes can be had.
That's the secret, really. Any market where product can be manufactured in volume is a market that can be targeted by the benefits provided by the Chinese manufacturing machine. Limited volume products are not a good fit for this system.
That said, I don't really understand the surprise or revelation perhaps implied by the author. What is so special about a tablet? In terms of the hardware involved and the manufacturing process, well, nothing. Absolutely nothing. A tablet is no different than any other electronic device.
And, yes, while a stereo amplifier or a CATV tuner use different components, a tablet is subject to exactly the same manufacturing process and obeys the same economic rules. Any product that can be manufactured in the tens of thousands, hundreds of thousands or millions of units per month will, eventually, race for the bottom in terms of pricing. This does not necessarily equate to lower quality.
The question that we should really be asking is: Why are we paying so much for tablets in the US?
>> Why are we paying so much for tablets in the US?
Because of few factors:
1. It's relatively hard to find a Chinese tablet that can you be sure it has good quality. That's what branding is for, but chinese tablets don't have good branding.
2. Marketing does help to sell products. Promotion is needed.
>Try to take advantage of that price and import it to the US and you'll find the cost is higher.
A college I did graduate work at has a huge auditorium named after a man who made tens of millions of dollars throughout the early 20th century importing stuff from Asia. Which taught me that huge profits can be had by importing exotic junk and <s>ripping off</s> selling it to your fellow citizens for many times what you paid.
The manufacturer he failed to identify is most likely Shenzhen Lyric Pioneer (http://www.lyxfsz.com/), which is behind dozens of the All Winner based Android tablets, under a wide variety of brand names.
I'm not sure what you're trying to say. Is the name common? (Google doesn't seem to find anyone else using that name in English, but that doesn't need to say much). In any case, the website URL I provided makes the reference unique, down to the address.
If you mean there are lots of similar products from other sources, then maybe. But pretty much all of the cheap Android tablet models that make it to Europe at least use the exact same board design (identical PCBs, apart from minor changes depending on features, but even most differences between models is accounted for by what components are mounted on the PCB, not differences in board design), the same handful of cases, and the same Android distribution and the same model numbers - everything points to a single source for the ones sold in the UK at least, but maybe none of the other manufacturers bothers with the export market.
I've seen nobody dig up any alternative manufacturers of these specific models over the last couple of years. There may be a few others, but the AllWinner based tablets soldin Europe seems to be pretty much from a single source. If you see a large number of different brands, that doesn't really say anything - that's the case for the ones shipped to Europe too.
The low end of every successful product category ever created eventually becomes a commodity. The author has equated the commoditization of low end tablets with the death of one of the worlds largest industries.
This would be like saying; margins are slim on spreadsheet software, the software industry is dead.
This article exudes a failure to grasp basic economics.
It's worth noting everyone in the hardware business knows this. For example: why do you think everyone is fighting over the living room? Players like Samsung want to sell you a cheap tablet so you might buy the smart TV it pairs well with. And then maybe you'll buy content there too.
What is really exciting about this is the impact on emerging markets. I live in Ghana and tablets and phones are how people access the internet, and will for the foreseeable future. If tools get good enough there might never be PCs as a tablet seems to be a much more accessible interface to get started with.
It is an interesting market to think about trying to monetize but the potential is huge as tablets drop to a price point where average urban dwellers (who are currently barely computer literate) can afford them. I already see iPads in the hands of the richer crowd and expect to see cheaper Androids flooding the market very soon. The need for custom software to make it easy for a population that can only hunt-and-peck is going to be huge.
Another win is when these products become components themselves. Think robotics and other DIY projects that can have a huge amount of functionality out of the box thanks to an established platform tied to an excellent selection of sensors and communication options.
As a alleged kernel engineer I wonder what this means for me.
For now, I see it means that one person out of a dozen gets to write the device driver -- if that --and the rest of us get to do patch slavery. heh. :)
as far as linux, it is kind of sucked the air out of the room for embedded development, but I think in kind of a good way. I'm sort of out of an interesting systems job, and people who think they can write an app in user space for their device and be done with it are in for a shock when it doesn't go quite right, but with embedded linux people can just write an app in user space for their device and be done with it. Yes, you read that right.
The first question that popped in my mind as I read this was: how will this affect Apple over time?
If tablets with decent specs are available in China at relatively low volumes for $35 each, it's a matter of time before we start seeing free and nearly-free tablets in developed countries like the US. (Not just Amazon; companies like Verizon and Comcast could throw in a free 7" Android tablet just for signing up with them.)
Will consumers continue to shell out for iPads, iPhones, or iPods to the same degree when they can get decent Android devices for near zero?
If the market follows the iPod model then consumers on a whole will prefer the Apple models over the "cheap" alternatives. This will continue until the market is superseded by another market.
If the market follows the PC model then Apple's share will collapse to a modest percentage, but will still control the profit share.
I'd argue that following the iPod model rather relies on the competition's devices remaining fairly horrible by comparison - none of them ever had such nice hardware, and I never tried one with adequate software to handle several thousand songs on the device. This seems unlikely to repeat itself to me; IMO* the Nexus 7 is an extremely nice little tablet which proves this kind of thing can work, and other manufacturers can take advantage of Android to provide good software, which often let down the iPod competitors.
There is a third option of course; that the market follows neither model that have gone before, and Apple does not win this time. We won't know for sure until after, though.
* Disclosure: I work at Google, so my opinion is not without potential bias.
"Amazon is also clearly way ahead on this model. At the Kindle launch event last week, Jeff Bezos highlighted that Amazon does not make money on the Kindle, it makes money on the content it sells on top of the Kindle."
And Nintendo has been aware of this since the 80s. Consoles have been closed platforms with razor thin to loss leader margins on hardware for over thirty years now. It's only that the development model itself has shifted with tablets and smartphones, they're a bit more open than they used to be.
The 1st thing I was thinking about the $45 China quoted market price (which is probably lower since it doesn't include either volume or haggling) was the cost of shipping from China to the other markets. At the end of the article we see the price after shipping translate to $79, which adds approx 100% to the cost in-stores. I guess the next wave will involve ways of either making shipping and the process of importing cheaper, or just circumvent it all together with say 3d printing.
Hardware will die, when web sites or apps will give them for free (as a true commodity). Imagine, you get a nexus tablet when you sign up for Gmail or Google Apps.
2 cents: After the hardware break even point how does a hardware manufacturer gain an advantage in such a market? Add malware to the build.
The manufacturers are faceless, nameless and blameless. There's no way for a bad sale to really hurt them. Hence, no market incentive to keep it clean.
Expect these to go lower still, but personally I would stick to branded tablets for anything requiring a secure login.
It's called differentiation. If you don't have it, you're in a commodity market (Android anythings). If you do have it, you're not in a commodity market and generally hardware gross margins hover around 50% (or more!).
If you won't innovate and differentiate, then yes, hardware is dead. You won't make any money these days making something someone else makes cheaply. _MAKE_SOMETHING_ELSE!
I guess the key will become content.
Tablet makers will want to be "the only tablet that can do X" where X won't necessarily be a technical hardware feature but rather a deal made with a content producer to be the only platform for their content to be distributed on.
That way you can sell devices at a huge markup despite the hardware being identical to lower end models.
This is what Amazon seems to believe, although they are marking down prices, not marking up.
They appear to be fine with producing cheap, commodity tablets as a means to enable more content distribution from their services. Classic razor blade model. It's worked well for Kindle (ereader version) so far, and I imagine it will work pretty well for their tablets.
When you have good content, you want to practically give away the vehicle that delivers that content.
It would be possible to come at it from the other direction though.
Let's say Apple decided to buy up some big content producer or network. Let's say HBO because that's the one everybody seems to talk about.
They could now make that content exclusive to their devices, or perhaps even models of their devices. Say you want to watch "game of thrones" you have to buy the 16GB instead of the 8GB one of whatever. Despite the fact that there is no technical reason for this to be required, you can then charge much more money for the 16GB one, an order of magnitude more than the extra flash storage is worth.
Do keep in mind that $35 USD in China is not directly comparable to prices in the USA. And not just because of the cost of living in the USA.
There are no returns, for example. When you walk out of the store, that's it. If there is any kind of problem, your main option is to just throw it away. There is no tech support either.
Confusing that he shops in Shenzen every "four to five months" but had only "heard" that tablets had gotten cheap, what he's reporting on has been going on for at least 18 months.
Amusing then, that there is so much interest in hardware. A hardware company seems to win a big prize in practically every hackathon I've seen in the past year at least.
Android 2.3, never going to get updated, crappy resolution, slow single core processor...
Honestly, it's going to suck compared to a Nexus 7. Remember, Android 2.3 IS NOT a tablet operating system, the first of which was 3.0, so it's basically a 7" non-cellular Android phone.
Right, I was referring to the small post script at the end of the article.
"I thought discovering the A-Pad was pretty exciting. So I was dismayed to find that the week after I got back from China, a device that looks a lot like my A-Pad was on sale at Fry’s Electronics for $79. No brand listed. The process has already begun."
I didn't mean to say that the link was for the main tablet in the article. Guess that wasn't clear.
The free-fall in PC prices in the 90s "killed" the PC, except that every major PC manufacturer still sells high-end models, and retailers still make money on them.
The free-fall in automotive prices in the 20s "killed" the automobile, except that people kept buying faster, sleeker, newer models anyway.
Like so many other electronics and everyday devices, the commoditization of tablets won't "kill" the tablet. It will result in a glut of disposable, troublesome, irksome devices, but there will still be a very nice market of people willing to pay more for a better device. Go make money there, you'll be happier anyway.