According to industry blog Digitimes, Eastern partner manufacturers are expecting an inventory glut in Android-powered tablets after the holiday—exacerbating what may already be an oversupply problem. Insiders are blaming the iPad and the Kindle Fire, and high consumer expectations for Windows 8 tablets arriving in 2012. This sounds like bad news for Google, but things could get worse if rumors of an Amazon smartphone prove true.
You may ponder that Google has dropped the ball for Android on tablets when you read Digitimes' words that "the inventory problem will appear to be significant after the 2011 year-end peak sales period, accoring to Taiwan-based supply chain makers." So many unbought Android tabs may be cluttering the shelves and warehouses in fact that waves of price cuts are predicted in the early New Year. That sounds attractive for potential Android tablet buyers, but it's as bad a sign for Google as HP's earlier price cuts for its then-doomed TouchPad were, and that price cuts for RIM's ailing PlayBook tablet are.
To blame are two tablets: the iPad, of course, and the new Kindle Fire. Changewave research has just published some statistics that underline how much of a hold these two devices have over the market. Among 3,000 interviewees of those who said they were planning to buy a tablet, 65% said they'd be buying an iPad, and 22% were plumping for the Fire—just 4% said they fancied a Galaxy Tab from Samsung, which is regarded as one of the most successful full-on Android tablets so far. The Fire, on the other hand, completely buries Google's Android UI beneath a custom Amazon user experience that's shaped around all the content that Amazon can supply—books, music, videos, and thanks to its own tightly curated app store, apps too. That all but cuts Google out of every revenue stream from the Fire.
Overall 130% boosts in tablet sales are predicted during the 2011 holiday buying window, and that's a huge success for Apple and Amazon too, which has seemingly bagged the number two tablet slot just weeks after the Fire's launch. Interestingly, Changewave's data suggests that the Fire isn't eating iPad market share—it's displacing other Android tablets, probably because it's clear the Fire isn't as full-featured a machine as Apple's, and yet it delivers a killer combo of low price, Amazon's powerful brand images, and excellent access to Amazon content.
What Google may have messed up on is delivering a rich, high-powered Android version for tablets—and delivering inconsistently for those it has already powered. Articles containing lines like "while there's no word yet in an Ice Cream Sandwich updates, you can bet that Sony's pushing for one" (referring to the latest tablet-friendly Android build, V5.0, in context of Sony's unusual and interesting S-series Android tablets) typify the problem. And with Microsoft's upcoming Windows 8 for tablets expected to allow millions of wannabe tablet users to work within the familiar Windows environment, Android tablets may have a tough sell in 2012.
Which leaves us looking at Amazon's Kindle Fire tablet. It's selling like hot cakes, and there are already rumors that another manufacturer, Foxconn (Apple's lead tablet and phone partner) is coming on stream with more 7-inch tablets early in 2012. That's a sign that Amazon isn't suffering inventory problems like other tablet makers. And as a different sign that Amazon has bigger plans, there are already swirling rumors that Amazon has plans to bring an 8.9-inch Fire to market in the second quarter of 2012. We can't know, but we can guess that Amazon is planning a similar low price for this machine (which is pitched more squarely against the iPad) and may also bump its internal specs to deal with criticisms about the sometimes jerky performance of the existing Fire.
All of this is fuel for the rumor fire that Amazon is planning, later in 2012, to take its mobile device experiment one stage further and into smartphones. It's a natural move, because as we've noted the Fire is all about delivering Amazon content to Amazon clients via its 100% Amazon-centric UI. And there's no reason this same model wouldn't work on a smartphone. Using its experience with the Fire and earlier Kindles, Amazon now knows how to produce high-grade hardware that's distinguished by its design and capabilities. Plus there's the almost unchallengable success of Whispersync to remember—a seamless and free way for users to get content for their Kindles, piggybacked on 3G cell phone signals. There's also news Amazon's bought a voice-recognition firm to rival Siri, possibly leveraging its own extensive cloud service servers for the back-end processing.
If Jeff Bezos' firm chose a mid-range specification for the chips, internal storage, screen, and other hardware of the Kindle phone, it could offer it at an extremely competitive price—along with a full-fledged ecosystem to deliver content and apps that even Google can't rival. Do we see a sniff of desperation in Google's recent moves to get into the MP3-vending game?
An Amazon smartphone like this, priced at a $100 to $199 range and leveraging Amazon's ecosystem and its cloud services and brand would immediately make a splash in the low-mid smartphone market because it'd be hard to find a rival to it among existing Android handsets (and even non-Android ones)—devices which offer only some of the seamless content access Amazon offers, and often a scrappy and unreliable access to apps on the Google app market. Amazon could even offer the phone for less than $100 because it's been suggested the firm is selling Fires at a loss, knowing it can recoup the money—and plenty extra—through ongoing sales from its store.
Such a phone would be a true innovation in the smartphone market that's become a little stagnant. Android phones have secured a big lead in sales, but Apple's share isn't slipping too fast at the moment—and merchants seem to be selling out of the iPhone 4S as soon as it arrives on its shelves. The entry of a rich-content Amazon phone would shake the market up dramatically, likely stealing big chunks of the low-price market, disrupt the cold war, and may thus even prompt Google and Apple to move ahead with more of their own innovations. That would only benefit consumers the world over.
[Image: Flickr user micahb37]