CES 2011: Tablets

We continued to probe the question “Why have tablets achieved such market velocity in a short period of time?”

Our Assessment

Tablets have achieved a critical mass in less than a year for 3 reasons:

One is left wondering if this not just another example of an embedded processor product which has a screen on it. If so, why are tablets so hot in 2011?

This is where Apple is the defining company. It has single-handedly shown that this product space is viable by the market it has created. The reasons are well known but the combination of user experience, form factor, pricing and applications all resonated with consumers in a way that this market space has never done before. Apple’s success has created a target.

Google’s ability to challenge Apple, with a totally different business model, has both established a viable alternative but for the ODMs and OEMs making tablets, and made a critical component a commodity and free – the OS.

There is another critical factor – the electronics infrastructure in Asia. We watched in the early years from 2000 to 2005 how Taiwan struggled to make mouse products which were first competitive and then at the leading edge. First was laser based mouse products based on HP chips. Over a span of 3 – 5 years the capabilities of many companies rose to include quality engineering and manufacturing and thus credible products. In short, they developed the necessary core competence to compete with the PC OEMs, Microsoft and Logitech. This has now included Chinese companies. It is this competence and hungry companies ready to leap on viable market opportunities, which is descending on the tablet. They will drive costs out of every corner of the product and accept margins which US companies will walk away from.

For the Asia electronics ecosystem, the major risk factors have been removed which would normally block market entry. That is: there is a demonstrated market and the complex and difficult software engine is available virtually for free.

There is another component, tangentially related to 3D. A major cost component of the tablet is the display. The TFT LCD display industry is getting increasingly anxious about its market after HD penetration begins to saturate. Where is the next market? At one time this was seen as display signage but this appears less likely to take up the capacity used for televisions. A consumer product is needed to consume massive amounts of display area. The tablet is one, IF an individual or family buys multiple tablets. This is a price issue and one that the Asian electronics ecosystem is well prepared to tackle.

Given that a bow wave of tablets is about ready to happen what does the future look like? A panel on Consumer 360 provided an excellent backdrop. Here are some highlights.

Conclusions

Now we can see the interplay and role of the Asian electronics infrastructure and the future of these connected screens and devices.

Tablets are one screen of the many but a very important one. It fills the gap in display real estate. The exact role it plays will vary by individual and location. There will be no single concept for the tablet. The notion of a consumptive device or a productive device is too narrow a classification. They all will exist.

A key role which the tablet will play, which the smartphone will not, is as a ubiquitous device. As prices decline this enables the ownership of many devices. They become like sheets of paper scattered about and with specific functionality.

To achieve this environment means continual declines in pricing to the point of being disposable. The Asian ecosystem is well suited to such a challenge.

Just as important, there must be a larger context for the role all the screens play. This means the integration of the use environment, the relationships between devices, personalization and identity. This is the huge challenge. We are only at the beginning.

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