iPads Are Pushing Low-End Tablet Prices Still Lower: Report

Apple’s decision to reduce the iPad 2 to $399, following the introduction of the newest iPad majorly affected pricing in the market. During the first quarter, the average price was down to $386, from $488 a year ago.

The average tablet price, during the first quarter of 2012, fell 21 percent to $386, compared with a year ago, IMS Research reported June 8, citing data from its quarterly tablet tracker. While low-end tablets with much in common are having to compete aggressively on pricing, the dramatic first-quarter drop is largely attributed to the dominating player on the high end of the market: Apple€™s iPad.

Apple€™s decision to lower the price of the iPad 2 to $399, following the introduction of its third-generation iPad, €œhas meant greater price pressure on its rivals, forcing them also to reduce price to make their products competitive,€ said the report.

While makers of low-end tablets, typically priced below $200, are seeing €œbooming shipments,€ they€™ve still had to lower prices. They€™ve been rewarded, the report added, by winning €œwidespread adoption€ this quarter, generally in emerging markets.

€œThere are few innovations from vendors to differentiate their tablets; low price seems to be the major factor to attract consumers to buy tablets other than iPads,€ report author Gerry Xu said in a statement. €œMore vendors are expected to focus on the low-end tablet market. However, to balance performance and profitability with a low price remains challenging for most tablet vendors.€

A Fujitsu marketing executive, introducing a new Ultrabook this week, likened the low-end of the Android tablet market chasing after the lowest prices to the netbook market€”which has barely been given a backward glance since the introduction of tablets.

According to IMS data, the average tablet selling price during the first quarter of 2011 was $488, which climbed to $525 during the second quarter. The third quarter of 2012 saw a steep fall, to $438, and remained mostly consistent into the fourth quarter, rising only to $444. During the first quarter, however, with the introduction of the newest iPad, came the drop to $386.

Analysts had speculated that, while a $500 iPad was hardly a competitor to the $199 Amazon Kindle Fire€”which sold strongly through the fourth-quarter holiday season€”a $400 iPad 2 had greater potential to woo away potential Amazon buyers.

On the day of the third-generation iPad€™s arrival, IMS€™ Xu, in a statement, said he expected little growth for non-iPad tablets, with the exception of the Kindle Fire and tablets running Windows 8, which are expected to arrive during the fourth quarter.

To date, he added, €œthere is no significant threat to the iPad€™s continued dominance in the tablet market. In fact,€ he added, €œthe share of Android tablets is forecast to fall from 35 percent in 2011 to 26 percent in 2012.€

Xu reiterated that the majority of future Android tablets will target the low-cost side of the market.

During the first quarter, according to research firm IDC, Apple shipped 11.8 million iPads, for a 68 percent share of the market. The mainstream Android vendors, IDC Research Director Tom Mainelli said in a May 3 statement, were beginning to grasp what Amazon, Barnes & Noble and Pandigital figured out early: that to compete against Apple, €œthey must offer their products at notably lower price points.€

Mainelli added that the impact of tablets running Windows 8 remains to be seen, though pricing will again be important, as will consumer reception to the tablets and their ability to integrate with traditional Windows systems.

The worldwide tablet market, IDC Program Vice President Bob O€™Donnell added, €œis entering a new phase in the second half of 2012 that will undoubtedly reshape the competitive landscape.€

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