Average tablet price drops dramatically thanks to iPad pressure

According to a report from IMS Research, the average sales price of tablets was $386 during the first quarter of 2012, a 21-percent drop compared to the same period last year.

The price decline is a result of intense competition in the tablet PC market, and Apple is paving the way, according to IMS. With the release of the third-generation iPad, Appled reduced the entry price of the iPad 2 to $399. That meant greater pressure on its rivals, forcing them to reduce prices to make their products competitive.

Vendors have found few ways to differentiate their tablets. A low price seems to be the major factor in attracting consumers to buy tablets other than iPads, according to Gerry Xu, market analyst at IMS. Low-end tablets have sold well, and vendors with products in this category have helped lower average prices. Today’s low-end tablets typically have prices below $200.

Also, white-box tablet makers have lowered prices below that price point and have as a result have won widespread adoption of products in the first quarter, primarily in emerging countries, said Xu. However, balancing performance and profitability with a low price remains challenging for most tablet vendors, Xu said.

That point was echoed by Nvidia in a recent blog post, where the company said, "It's incredibly difficult to manufacture a low-cost tablet at all, even with a compromised experience." To help change that, Nvidia has developed the Kai the reference platform, which is a recipe that tablet makers can use when they're building low cost, quad-core Android tablets targeted at the $199 price point, the company said.

Expected upcoming products—such as the second version of Kindle Fire and the rumored Google Tablet—will mean increasing pressure on vendors of low-end tablets to enhance performance while still keeping prices low, according to IMS.

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