99 Dollar Tablets Are Here

Acer is breaking the price barrier for tablet computers. WSJ reported Acer will release a tablet for just $99 in 2013. When Apple’s (AAPL) iPad was launched, the $500 tablet was the baseline. Although Apple still dominates in this space, in North America in particular, smaller players want to compete in the lower-priced segment.

Consumers in the United States may not get the option to buy a tablet for $99, since Acer is focusing primarily in the emerging markets like China. The low-price point is still something to be concerned about for investors. PC makers, facing strong competition in developed regions, are relying on emerging markets for overall unit sales growth.

The seven-inch tablet has the following specifications:

• 1024×600 resolution
• 1.2Ghz dual-core processor

The tablet available at nearest this price-range is Barnes & Noble’s (BKS) Nook, which sells for $139. Amazon’s (AMZN) Kindle Fire sells for $159.

Analysis:

There is growing demand for 7-inch tablets, which will only accelerate as the price moves towards the lower end. Apple recognized the threat, and began selling a mini-iPad starting at $329. Although the iPad mini costs $188 to build, Apple is unlikely to lower the price of its device. Consumers are still more than willing to pay a premium for Apple products.

Still, Google’s $199 Nexus showed consumers are willing to buy a tablet at higher prices. The 8GB Nexus 7 continues to be unavailable at the Google Play store, due either to limited supply or excess demand. The $249 model (with 16 GB storage as opposed to 8GB) is more readily available.

Cheap tablets will continue to put pressure on PC makers, but time will tell on when companies like Dell (DELL) or Hewlett-Packard (HPQ) will make inroads on improving profit margins. Microsoft (MSFT) defined a baseline for Windows 8-based tablets with its Surface RT release. It will be up to the hardware makers to promote productivity and the benefits of a keyboard-based device.

The main challenge for hardware makers is lowering the price point for ultrabooks and tablets so that they are more competitive with tablet devices.

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