As I predicted when the Kindle Fire was introduced (such as in this post and this one), Amazon’s low price, underpowered tablet has caused more problems for other Android tablet makers than for Apple. In the process, it has sealed Apple’s dominance of the surging tablet market.
The Kindle Fire sizzled during its debut in the last quarter of 2011, shipping 3.9 million units, and capturing a 14% share of the tablet market, according to ISuppli. The Fire’s performance lifted Amazon to 4.8 million units overall, and an overall tablet market share of almost 17%. Amazon took some sales from the iPad and even more from other Android tablets—it accounted for more than 50 percent of Android-based tablet sales.
The success was fleeting, however. IDC reports that Kindle Fire sales have slowed dramatically, down to just about 750,000 units in the first quarter of 2012. Overall market share for Amazon’s tablets has dropped precipitously; it is down from 16.8 percent to just over 4 percent.
Apple easily shrugged off the Kindle Fire’s temporary surge. IDC reports that Apple sold 15.4 million iPads in the fourth quarter of 2011, for a market share of almost 55 percent. As the Kindle Fire faded in the face of the iPad3 earlier this year, Apple’s market share climbed back to 68 percent.
Other, mostly Android-based tablet makers, however, are not so fortunate; the Fire has scorched their prospects.
The Fire essentially redefined the non-iPad tablet market as the low-price segment and, as IDC reports, most other tablet makers have shifted their attention towards it:
The mainstream Android vendors are finally beginning to grasp a fact that Amazon, BN, and Pandigital figured out early on: Namely, to compete in the media tablet market with Apple, they must offer their products at notably lower price points.
In addition, Google will soon launch its own tablets into this segment, as will makers of Microsoft-OS-based tablets. Microsoft jumped directly into the fray with its investment in Barnes Noble’s Nook. To add insult to injury, Apple is positioning its older tablets as low price alternatives.
The problem for all players in this competitive low-end segment is that Amazon is more motivated by the prospect of the Kindle Fire as an enticing storefront for its merchandise than by direct profits. So Amazon will undoubtedly continue to aggressively price its tablets at around the cost of making them, thereby creating an extremely low price umbrella for everything but the newest iPads.
In other words, there might be a market for low-price tablets, but there will be no profits.
This might turn out fine for Amazon, which can leverage its retail and digital content businesses. Apple is also sitting pretty; it gets to dominate the high-end tablet space and soak up most of the industry profits. Everyone else ends up squeezed into the no man’s land between them.
(Updated 5-7-2012 to break out 4Q2012 Fire sales from overall Amazon tablet sales.)
What do you think, will Android tablet makers ever earn any meaningful profits? Can Android compete directly with the iPad?