Apple iPad: too cheap for Taiwan?

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Apple's iPad prices, which range from $499 to $829, might start too cheap for Taiwan. Leading suppliers such as Asus and MSI have already developed their own tablet PCs, but they were expecting to undercut an Apple price of $800 or more. Undercutting $500 is harder, and might not be worth the effort.

A report today in Taiwan's DigiTimes, Unexpectedly low Apple iPad price forces notebook vendors to re-evaluate their tablet PC strategies, notes that "starting a price war at below US$499 raises concerns that any profitably will be driven out of the nascent tablet PC market, before it even has a chance to take off. Vendors are currently evaluating their strategies hoping to avoid price competition, the sources noted."

Asus had been expected to show its Eee Pad tablet at the Computex 2010 trade show in Taiwan in June. It's based on the nVidia Tegra chip and was expected to cost less than $500. MSI's 10in touchscreen tablet is also based on Tegra; yesterday, DigiTimes published a photo of it taken by its reporter, Monica Chen (MSI plans to launch an US$500 tablet PC in 2H10).

Apple uses Taiwanese contract manufacturers such as Hon Hai (Foxconn), which also makes Xbox 360s for Microsoft. Rival contract manufacturers such as Pegatron, which has been spun out of Asus, may not find it easy to undercut its prices, especially if manufacturers include things like USB ports and SD card slots that the iPad lacks. Much of the differential would come out of profit margins.

Another problem is that the iPad's sales volumes are uncertain. Earlier this week, DigiTimes reported that "Positive watchers predict shipments to top as many as 8-9 million units, but those who are less optimistic look to shipments of merely 1-1.2 million units":

"the skeptics pointed out that sales of the MacBook Air have not measured up to expectations, meaning that not all Apple-branded products can expect guaranteed sales."

All this leaves sales of me-too tablets even more uncertain, though there might still be worthwhile marketing opportunities in parts of the world that Apple barely reaches.