Steve Jobs
Tablet Wars: The Scramble to be Second
June / July 2010
Volume 8 Number 3
The technology industry is built for copycat behavior. Since Apple launched its iPad on April 30, it has sold more than a million of the tablet computers. Though it had mixed reviews, consumers took to it and Apple reported that milestone within a month. That is a better start for sales than the original iPhone, which has gone on to sell more than 50 million units. It is a remarkable debut for a new category of computer.
But the question remains how many more units Apple will sell. Analysts estimate that Apple could sell 5 million to 7 million units in its first year. That would set it on its way toward matching the sales of the iPhone, and it would classify the device as another big hit by Apple, which has revolutionized computing with devices such as the iMac, the iPod, the iPhone, and now the iPad.
The urge to copy the device has been strong. Even before it debuted, speculation ran rampant about the specifications of the device. You could almost hear the design shops and clone factories kick into gear as soon as Apple announced the details in January. The device had a 9.7-inch display, a multitouch screen with up to 11 points of contact, the ability to play games, view websites and display electronic books. Apple designed its own microprocessor for the iPad. It had an Imagination Technologies graphics component built right into the microprocessor. That chip is something that only Apple can use in its own products.
That’s probably a good short-term strategy for Apple. It can recapture lost profit margin, differentiate the product from others, and allow Apple to control its own destiny and pace of innovation. No longer is it beholden to the likes of Samsung or Intel for its chip innovations.
But that move has also inspired some very powerful companies to act in concert against Apple. And that could lead to a vast flowering of tablet computers across a very wide spectrum. These companies make the ingredients for tablet computers that could compete with Apple and expand the market to a much broader audience in the coming years.
Intel, for instance, is one of the snubbed giants. The company has just taken the wraps off its redesigned Atom microprocessors, which can be the brains of smartphones or tablet computers. Intel sales and marketing chief Tom Kilroy expects that tablet computers will grow at a compound annual growth rate of 73 percent to 88 percent over the next five years.
So Intel is going to do everything it can to arm Apple’s rivals. Paul Otellini, chief executive of Intel, said that the company isn’t just a chip maker anymore. It creates hardware platforms, software and services for its customers. The only thing it doesn’t do is put its name on products and sell them in stores. Roughly 22 percent of Intel’s engineers are software programmers.
What does that mean? In an alliance with Nokia, it created the MeeGo operating system to run on tablets and netbooks. It has also launched the Intel AppUp Store for apps that run on tablets and netbooks. The whole point is to grease the skids for the market to expand dramatically. Anand Chandrasekher, senior vice president of the ultra mobility group at Intel, said that the company has many service providers who have signed up to adopt the Intel Atom platform for future products. In the tablet space is Open Peak, a company that is trying to create an iPhone-like replacement for a home phone. You can use it to make phone calls, display photos, surf the web or read e-books.
Open Peak is just the beginning of the customers. Intel has the ability to seed an entire industry of rivals for Apple. The company says its newest Atom chip is 50 times more power efficient than the previous one and is more powerful as well. The tablet version of the chip runs at 1.9 gigahertz, a lot faster than Apple’s A4. And Intel says tablets can be built around its chip that are as thin as 15 millimeters.
Broadcom is another multibillion-dollar chip maker that didn’t get Apple’s business. The company is also hoping to create rivals in the same way that Intel is. Broadcom has created a platform of four chips that create everything needed to drive a tablet.
Tablets using those chips are being launched in the coming months and they will introduce a variety of business models. Martyn Humphries, vice president and general manager of the IP Communications division of Broadcom, said that four major contract manufacturers—known as original device manufacturers—have announced designs using the Broadcom ICE platform (ICE stands for information, communications and entertainment) for tablets.
NTT has shown off the Hikari iFrame tablet computer that it will give away for free to those who subscribe to either its broadband or phone service. Other ODMs include Askey, LG Nortel and Moimstone.
“Not all tablets are created equal,” Humphries said. “Some complement what we have, and some will replace the devices we use today. But we know there will be multiple distinct products in the home.”
Broadcom’s tablets will be smaller—probably with 7-inch screens or smaller. They can serve as remote controls in the digital home, turning on TVs, playing video streamed over wireless networks to various TVs in the house. They could be used for a variety of purposes, including a video conferencing system within the home. This kind of tablet plays to Broadcom’s strengths, as it has chips in everything from home Wi-Fi routers to set-top boxes.
Humphries said many of these touchscreen tablets will have low costs and will be given away for free, in contrast to the $499-plus iPad. They could be subsidized by plans where consumers agree to a two-year subscription service for a TV or broadband service. They could run the Android operating system and be targeted at people who wouldn’t otherwise buy a device for luxury entertainment purposes. Humphries says the tablet market will take off faster this year because of the maturity of the Android operating system from Google, which has broadened the software’s reach beyond smartphones.
Nvidia’s Michael Rayfield, general manager of the chip maker’s mobile division, believes that tablets will set themselves apart from netbooks and laptops as media consumption devices. You will use them to watch videos, view the web, read books, play games, and listen to music. The company’s Tegra 2 processor is coming out this year to accelerate all of those media functions. Rayfield said Nvidia has seeded lots of development systems for Tegra 2 into the market so that companies can develop their own table computers. He said that Android-based designs will likely be the most popular, but Windows 7 Phone devices may also be used in tablets. Tablets with Tegra 2 chips in them are expected to ship in the third quarter of this year. Rayfield’s boss, Nvidia chief executive Jen-Hsun Huang, declared 2010 to be the “year of the tablet” and said there are 50 different Tegra-based tablets coming this year. Some of them could be car navigation computers with lots more capability than typical GPS units.
Lastly, one of the biggest developments of the year was Hewlett-Packard’s $1.2 billion purchase of Palm. HP executives praised Palm’s smartphone business when they talked about the deal. But they also said it was noteworthy that they had acquired WebOS, an operating system that can serve as the heart of a series of smartphones, gadgets and tablet computers.
HP reportedly decided to cancel a Windows 7-based tablet that the company showed off at the Consumer Electronics Show in January. Now HP is going to do a WebOS version of that tablet instead. That may delay the launch of the HP tablet somewhat, but the WebOS device will likely be very powerful. One of the things that the WebOS has is multitasking. That is, much like a computer, it can handle a lot of things at once. That means that a tablet based on the WebOS will be much more functional, just like a computer.
Apple is also going to make a new version of its iPhone operating system available in the summer. iPhone version 4 will have multitasking built into it as well. You can bet that Apple is going to beef up the iPad at some point with more features and lower costs. For instance, it could add a webcam to the device and more input mechanisms such as universal serial bus (USB) ports. And Apple has to be working on new versions of the A4 chips if it is going to keep up with the likes of Intel and Intel’s customers. If the iPad gets all of these things and multitasking as well, it’s going to be a very powerful computer in its own right that will give the personal computer itself a run for its money.
It isn’t clear who is going to win. Apple has been moving toward vertical integration— stacking all of the capabilities it needs to make its products, such as software, services, hardware, chips and operating systems. Google has followed the same path. It launched the Android operating system. Then it helped design Android phones. Then it designed its own Nexus One phone, and it has now moved on to design tablet computers. Google also bought Agnilux, a chip design company that was founded by the same people that started PA Semi, a microprocessor design company that Apple bought in 2008 and used to create the A4 chip.
Otellini at Intel calls this “Apple envy,” but he notes that the lesson for everyone is that they should be open. That’s because “open wins” in the tech industry, Otellini said.
But one things for sure. Consumers are in for a lot of choice of devices in the future.
“We are really close to being able to touch all of these wonderful devices,” Rayfield said.
Dean Takahashi reports from Silicon Valley for Innovation and is lead writer for GamesBeat at VentureBeat.
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