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The Bloody Battle for $50 Tablets

The following video is from this week's installment of The Motley Fool's Weekly Tech Review, in which Alison Southwick sits down with analysts Eric Bleeker and Lyons George to look at the biggest stories driving the tech sector this week.

In this segment, Eric and Lyons look at the cutthroat pricing battles in the tablet market as detailed this week in the Financial Times. While American consumers might be wowed by cheap tablet pricing such as Apple's (NASDAQ: AAPL  ) iPad Mini at the $330 price point, or Google's Nexus 7 at $200, or Hewlett-Packard's (NYSE: HPQ  ) Slate 7 tablet at $140, those "cheap" prices are nothing compared with the tablet battles in China. 

Inside China, a crash below the $50 barrier has unleashed a massive tablet boom. How are companies doing this? For one, local processor companies have created "good enough" designs that sell for a fraction of the price of high-end designs from NVIDIA  (NASDAQ: NVDA  ) and Qualcomm  (NASDAQ: QCOM  ) . On its budget-priced Slate 7, HP used a design from Chinese chip designer Rockchip. When HP tried to sell its TouchPad tablet for prices starting at $500 in 2011, it used a Qualcomm design. Perversely, low-cost tablets are also cutting costs by salvaging memory from PCs. 

The end result is that booming global tablet sales might not translate to much profit for investors; there's little money made in a $50 tablet selling at cutthroat pricing. Chip companies are facing pressure from Chinese designers whose prices they can't match. Top-end designs in America will still use Qualcomm or NVIDIA, but all the same these companies also aren't competitive in the fast-growing low-end segment of cheap tablets. 

Likewise, as price competition intensifies in the U.S., it's bad news for hardware companies. A company like HP, which is belatedly making another attempt at finding tablet success, enters a field far more competitive than it was a couple of years ago. Likewise, a company like (NASDAQ: AMZN  ) , which succeeded in part from selling Kindles below most competitors' pricing, is about to get more competition. 

This is all great news for consumers, and bad news for investors hoping to find profitable plays in tablets. To hear Eric and Lyons' full thoughts, and some companies that could actually benefit from cheap tablets, watch the video. 

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.

Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On July 21, 2013, at 10:55 PM, pangganipatchot wrote:

    Not trying to discourage the consumers. Don't trust these $50 tablets from China. They started out at about $100 each, I figured they will go down. I waited a few months, finally they dropped the prices down to around $50, I bought 3 of them and a few friends bought some too. No more than 2 weeks later we started having problems with them. 2 melted where the jack input for the charger is, 2nd the touch screen no longer works. My friends' either they don't charge or they keep freezing. The bad thing is when you return it for repair, the stores have different reasons and have to charge you for repairs. And they don't do refunds, but then again, I am in the Philippines. The bottom line is it's better to buy the more expensive and brand names as they have a reputation to worry about.

  • Report this Comment On July 21, 2013, at 11:32 PM, jwtrotter wrote:

    After an earlier article/video from the same team that basically showed more ignorance than competence in their comments about this market and also the gaming community, I don't take anything they put out seriously. They have the mindset of traders without any real serious understanding of the target audiences of many of the products they discuss. At least one them is very condescending in his comments and imo doesn't really get it.

    The reason the higher quality name tablets will continue to be successful is what the poster from the Philipines said. $50 tablets are a worse investment then a $200 tablet because you may just have to buy a few of the cheaper tablets to get the same performance you'd get from the one higher end tablet. Also, the panel is clueless at how the name chipmakers are planning on selling older lines of the chips as the newer chips come out. Tegra 3 is now working for the cheaper tablets in the US (and overseas) as the Tegra 4 comes out for the higher end for example. The name brand still works for the cheaper chips (or older) too.

  • Report this Comment On July 22, 2013, at 10:24 PM, 45ACPbullseye wrote:

    They could just come out with a tablet, name it Viagra, and see how many they sell!

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