Although tablet PC demand remains firm, average selling price (ASP) declines continue, as brands try to find the correct balance to compete against Apple’s iPad and at the same time fight strong pricing competition from fast growing private-label white box brands. From the supply-chain perspective, the increasing demand of white box brands is particularly important to LCD panel manufacturers, because they represent a huge market for LCD tablet panels.
Increasing numbers of newer brands are flooding the market, with prices as low as $69. Many low-priced tablet PC products, offered by unknown private label brands — mostly featuring 7-inch VGA TN-type display and priced at £55- £59 — have also recently become available in the European market.
While one can argue that the popularity of these very cheap, limited-feature tablet PCs could be short-lived, they could conceivably penetrate both emerging markets and more developed ones. Given that most consumers are focused on prices, the onslaught of white box brands is severely pressuring name brands, which are reacting with prices in the $159 to $199 range, such as Kindle Fire and Nexus 7. In Europe, Acer and Asus are competing in the £119 to £140 range.
According to our research, LCD tablet PC panel shipments reached 27 million units in March, an increase of 26% M/M, primarily driven by 7-inch panels, which accounted for 48% of total tablet PC panel shipments and grew 67% M/M. In Q4’12, 7-inch tablet PC panels accounted for just 33% of total tablet PC panel shipments. Non-name – or whitebox – brands accounted for 76% of the 7-inch panel shipments and 47% of all tablet PC panels, up from an average of 38% in the first two months of 2013. Apple is still the largest single consumer of tablet PC panels, at 30%, and Samsung accounted for 11%. Microsoft, Google, Acer, Asus, Amazon, Lenovo, HP, Barnes & Noble, and other name brands each only comprised 1% to 3% of March shipments.
Led by 7-inch panel sales, BOE was the world’s largest tablet-PC panel maker in January 2013; however, in February LG Display overtook BOE and retained its first-ranked position in March. Samsung Display also reported a clear increase in its 7-inch sized panels, with higher resolution WSVGA, thanks to business from its own tablet brands. At the same time, shipments of Samsung’s 10.1” WXGA dropped in March, falling to just about the half of its peak level in January.
The tablet PC market is growing rapidly, but at the cost of fast eroding prices. The market is just too new and crowded to find a simple value proposition. Some believe and hope private-label whitebox manufacturers are pressured badly in their finances, and there could be a shakeout in the future; however, it cannot be stated with certainty that these companies will be short-lived, as some manufacturers will eventually find ways to survive, along with panel makers and other supply-chain participants.
So, how will top-brands like Apple play in this market and react to the growth of whitebox players? Clearly top brands are putting great efforts to prove their value proposition and leverage the many resources they control, but the results are yet to be proven. We can most likely look forward to seeing more experiments, such as phablets, and possibly all-in-one tablet PCs and compatible notebook PCs equipped with dual OS.