If you follow the technology industry gossip, you’ll have heard the rumors that Apple will release a next-generation tablet PC at the end of January (kind of like Moses bringing tablets with the word of God?)
Industry gossip, especially gossip about Apple, is notoriously bad as the many analysts out there oftentimes fail to understand Apple’s business and misread the things that they hear.
However, given the very precise supply chain reports out there (as well as the #2 exec at European telecom firm Orange’s announcement that they would be a partner with Apple), I am leaning towards believing this device exists.
Granted this is all speculation (and there’s a significant chance the industry is getting excited over nothing), and my good (and very intelligent) buddy Eric disagrees with me completely (for good reasons), but my thinking on the subject stems from three things:
- A rapidly growing device category exists – When I first heard of the netbook category, I scoffed. After all, what is the difference between a netbook and a very cheap, underpowered notebook or an extremely powerful smartphone? However, as time went by, I was forced to eat my own words. There seemed to be an enormous appetite for such a device (as judged by the rapid growth rate of the netbook category) which didn’t seem to cut too deeply into notebook sales at all. Intel has even come on record as saying that netbooks are rarely bought, if ever, to replace notebooks! Whereas mobile phones are likely to replace portable media players (like iPods), it seemed that people were drawn to the idea of something in between a workhorse laptop and a smartphone to be used primarily to access the internet. This is also borne out by the booming growth in eReaders like Amazon’s Kindle which provide special interfaces, like special touchscreens and displays, which are tailored for casual internet browsing and reading. If there is a place for Apple to continue its rapid growth trajectory, a device category with specific technical needs and with potential for rapid growth like this in-between-smartphone-and-notebook eReader/tablet/netbook device would be it.
- Clear room for user interface innovation – The current generations of netbooks and eReaders could use some significant improvement. Most netbooks don’t (yet) support a touchscreen interface and rarely sport a user interface that really wows. eReaders today predominantly depend on current generations of black-and-white-only e-Ink displays which suffer from a very slow page-change rate. The potential for someone with the hardware and UI design chops that Apple has to implement a new generation of display technology and provide a much needed refresh in the control scheme for these devices is enormous, and it fits with Apple’s history of changing how the industry and the consumer thought of products like the smartphone and portable media player (iPhone and iPod).
- A vertical model fits – Apple’s standard strategy is to build strong end-to-end solutions that encompass hardware, software, and services in a neatly packaged product. This helps Apple maintain the quality of product experience, as well as extract extra profit by creating a powerful “walled garden” which prevents other companies from seizing control of Apple’s key features and sources of revenue. Take the iPhone for instance – Apple has built the phone, designed the operating system, created an application and music store, and negotiated the proper service contract with a wireless carrier. It doesn’t get more “all in one/vertical” than that! Similarly, if a tablet emerges primarily as a means to get on the internet and read books/publications/blogs, there are a number of clear ways for Apple to “go vertical” – including adding an eBook store to iTunes, charging publishers a fee to distribute their products to “iTablet” owners, building a subscription model for content access, etc. This wouldn’t be an easy battle, but given Apple’s success with mobile phone applications and digital music, there’s plenty of precedent for seeing Apple expand its “content empire” to other forms of digital content.
Of course, there are a number of good reasons why this prediction might not wind up being true:
- Apple doesn’t believe that the market opportunity is large enough. Is the growth in netbooks sustainable? Or just a product of the global recession pushing people to buy very cheap electronics? If Apple suspects its the latter, that would be a great reason to not distract management from more important tasks like maintaining or increasing its desktop/notebook market share or defending the iPhone’s market share against a growing Android threat (and potentially a resurgent Blackberry and Windows Mobile 7 threats).
- Apple fears cannibalization. While Intel might view netbooks as a chance to sell more chips without interfering with its higher-end chips, Apple may fear that Apple notebook users, many of whom don’t need all the processing power that’s in their machines as they merely use them to surf the internet or watch movies/listen to music, will simply “trade down” and be tempted completely away from buying Apple’s higher end notebook models and hence jeopardizing Apple’s long-term growth and profitability.
- Technological solutions to current problems aren’t mature enough. While the iPhone pushed the mobile phone industry, overnight, to adopt touchscreens, what is oftentimes not understood is that the touchscreen technology used by Apple has been around for quite some time (and were probably approved for use by Apple because they were mature). Many of the new display technologies to replace and/or improve on e-Ink are much less mature. If Apple has studied the problems facing current generations of tablet/netbook/ereaders and concluded that compelling solutions to them are still a year or two away, then, I believe that Apple would wait until they did come out to really storm the market.
- Apple doesn’t think it can compete with a successful vertical model. If Apple felt it couldn’t use its standard playbook of providing services/content along with software and hardware, then that would be a big reason for Apple to not consider this mode. This could be because of the presence of large book-sellers like Barnes & Noble and Amazon in the eBook space (who do not allow non-Amazon/non-Barnes & Noble approved devices to access their digital libraries) or because of a powerful third party like Google which is already pushing one universal access platform for all eBooks. In my mind, this would be one of the biggest, if not the biggest, reason for Apple to think twice about entering the tablet/eReader space.
I’m glad my personal financial well-being doesn’t depend on me making the right call on this one :-), but push comes to shove, given the pretty-specific-supply-chain checks and the fact that I believe the threat of cannibalization and small market opportunity to be unlikely, I believe Apple will make this plunge, and I eagerly await to see how it will shape this new emerging device category.6 Comments