Analyst says Surface could hurt Ultrabook, Windows 8 tablets

MSFT subsidies could mean US$499 Surface price and death for Android tablets

By Simon Sharwood, APAC Editor, 2nd August 2012

Taiwanese analyst outfit Trendforce thinks Microsoft’s forthcoming Surface devices will cannibalise the market for ultrabooks, put price pressure on Android tablets and confuse consumers.

The analysts’ WitsView service recently published a note in which research director Eric Chiou says that Surface devices’ 32GB of storage is a higher spec than that on most ten-inch Android tablets, justifying a higher price of US$599.

At that price Chiou feels Surface will “inevitably cannibalize ultrabook sales” and goes on to say that “Microsoft may not be pleased to see a competition between its own products.” Consumers may also be confused by the overlapping prices.

One way out, Chiou suggests, is for Microsoft to dip into its colossal trove of cash and subsidise Surfaces so they emerge to US$499, a ploy he says the company has done before when it took XBOX to market. The results of that subsidy program speak for themselves, as XBOX is now the number one console. A US$499 price would also slot surface in nicely between the iPad and ultrabooks.

Such subsidies could be bad news for Android tablet players, with Chiou offering the following scenario:

Surface may stand out in the market by sacrificing profits or getting subsidies from Microsoft, while the remaining brands are unlikely to possess the ability and will to do so. Undoubtedly, customers are expected to take the price of Surface as a benchmark for every single prospective Windows 8 tablets; that is, Microsoft’s Surface with an intentionally lowered price may decrease the price flexibility that affects its brand partners’ earning capacity, and even further impact their desire to launch new products.

That’s not all good news for Microsoft, as fewer or less-happy tablet-makers also means fewer potential Windows 8 tablet manufacturers.

WitsView nonetheless predicts that of the 94 million tablets it expects to be sold in 2012, four million will run Windows 8.

That’s decent uptake, however, as the new devices are tipped to emerge on October 26th. If we work on crude averages alone, without accounting for sales spikes pre-Christmas, four million Windows 8 slabs in sixty-odd days will represent at least 15% of tablets sold in the most-frenzied months of the selling cycle. ®

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Highly Rated

Posted Thursday 2nd August 2012 06:27 GMT

Anonymous Coward

Why not

Just wait until the Surface surfaces, when it does see what transpires.

Speculation makes for great Sensationalist headlines.

Posted Thursday 2nd August 2012 07:26 GMT

h4rm0ny

Re: Big supposition there...

"Apple are not an own producer. They are in effect the marketing arm of FOXCON, while apple design their goods someone else always produces them. This is a very common scene in many industries. I am unable to see any difference between MS or apple asking an OEM to produce a box and then selling it as their own"

I'd hardly call Apple the marketing arm of Foxcon. Apple are a pretty impressive company that produce all their own software on multiple platforms. I mean these days, Macs are actually Intel machines, but the software and design is what makes them different. But that's really beside the main point which is that there is a very great difference between "MS or apple asking an OEM to produce a box and then selling it as their own". Namely that Apple are the only ones that make their machines. There are many competing manufacturers producing Windows machines. The supposition of the analyst is that MS want to transition to an Apple model, but as another poster points out, it would be a very, very long process to move to a hardware monopoly even if it were possible. So really it looks more like this is just a shot across the bows from MS to get other manufacturers to up their game. It's a win-win for MS. If the Surface sells well, that shows Win8 in a good light and promotes themselves. If other manufacturers up their game and produce something better, that's a win for MS as well.

"I do wonder what all the fuss is about, slates have been out of use for years and these 'new' versions are a recycling of past ideas of form and function. (School slates of course had rounded corners on their wooden frames for safety reasons.)"

When it's time for steam engines, steam engines appear. I recall Neal Stephenson saying that though I think he may have nicked it from somewhere. Basically, sometimes you have to wait for the time to be right. Microsoft were producing tablets and hybrids for years before the iPad came out. They were good for some things, but the technology of the time made them big, heavy things with limited screen sensitivity and responsiveness. Apple timed things just right - they waited until the technology was there for something light and quick and then leveraged their success with phones into a scaled up tablet. It was steam engine time - the conditions for success were just right. You had the technology and wireless internet becoming pervasive and affordable. That's what all the fuss is about. You call it recycling of past ideas of form and function, but you might as well say a modern jet is a recycling of the Wright brother's work. Things like the Surface were not possible ten years ago and if they had been the wireless Internet wasn't everywhere or cheap enough... It's basically a tablet that you can also be productive on. I think it's going to sell great.

"So far as pricing goes, 'free' would probably be too much for me to pay for any of them and as for one with an apple on it, you could not even pay me to take it away."

Well I'm not an Apple user, but I suspect that's hyperbole. They're good machines as far as I can see. At any rate, you've clearly marked yourself as not the target market. Good for you. Rest of us are going to love having a ultrabook light device that we can both work on and sofa-surf on and take notes on with a stylus and have multi-user accounts on and connect standard interfaces to...

Posted Thursday 2nd August 2012 07:52 GMT

ribosome