A new report by Digitimes suggests that the first generation of Windows 8 tablets powered by Intel could be priced at $599 to $899. We can safely assume that the $599 ones will be the budget equivalents with low end hardware configurations, while the $899 ones will be the high-end ones, which will compete with the iPad 3 (or the iPad 4 if it is launched in October, as rumored) and Google’s flagship Nexus tablet.
Going by notebook pricing in the past, this seems increasingly likely because of a multitude of reasons.
1. Windows: The average cost of a Windows license has been around $150 in the past. We don’t expect Microsoft to slash prices of its most profitable offering significantly.
2. Intel processors: Intel desktop and notebook processors are much more expensive than the standard ARM processors currently used in notebooks and smartphones. It’s very likely that they won’t be able to undercut ARM processors to attract manufacturers.
Apple currently makes the iPad 2 for around $325, and likely spends another $25 for shipping, retail, marketing etc. After all expenses are accounted for, it makes a profit of $150 on each iPad 2 16 GB unit, and more on the 32 GB and 64 GB variants.
However, Apple outsources all its manufacturing to ODMs like Foxconn and Pegatron, and controls all aspects of its supply chain to procure components at a much lower price than any other manufacturer.
Given this dynamic, it is reasonable to assume that any other manufacturer would have to spend much more to make a device that would rival the iPad.
Add the cost of a Windows 8 license and the additional cost of using an Intel processor, and it’s easy to see how any Windows 8 tablet by Intel would be priced in the $599 – $899 range.
However, as we have seen already, tablets that expensive don’t really sell much. When Apple is already offering an excellent tablet at $499, there is no way customers will try anything else that is priced much higher without any compelling reason.
To reduce prices a bit, manufacturers could go with ARM processors, but then their tablets wouldn’t support x86 Windows software, which is currently one of the major selling points for Windows 8 tablets.
If Microsoft does decide to bring down the license price for Windows 8, it would be leaving money on the table for each notebook or desktop sale. If it doesn’t, it won’t be able to gain the traction it needs to be successful in the tablet market.
With Android tablets now focusing on the low-end tablet market, and the iPad dominating the $500 price point, there is no way manufacturers would be able to sell enough Windows 8 tablets at a much higher price range.
This is why I think that Windows 8 is much better suited to touchscreen ultrabooks than standalone tablets. It’s hard to see a win-win scenario for Microsoft in the tablet market – one in which it beats the iPad in terms of market share as well as profit generated.