Tablet PC Makers Kick Off Price War

Electronics companies have long shaped their businesses around the mantra, "Make it faster, better, and cheaper than the next guy."

It shouldn't come as a surprise then that this exact scenario is starting to aggressively play out in the still fledging but already heated tablet market, where everyone and their mothers seem to be diving into the unknown and trying to win a piece of the action.

What comes as a bigger surprise is that the company starting the price war isn't even your traditional electronics enterprise. It's an e-commerce company with global market muscle.

Last week, Amazon.com Inc. (Nasdaq: AMZN) shouted a battle call in the direction of Apple Inc. (Nasdaq: AAPL), and hinted at the idea that the skirmish might be won via some combination of price and customer experience. Apple has since fired back. It introduced the iPhone 5 this week and cut the price of both the newest device and most of its predecessors. What this implies is a possible price cut for the next-generation iPad.

During the official product launch, Amazon CEO Jeff Bezos announced that the new Kindle Fire HD 8.9-inch tablet with 4G would sell for $499, which syncs up to the base price of an Apple's iPad. The WiFi-only model comes in at $299, and the 7-inch, 16 GB one with WiFi at $199.

Widespread commentary about Amazon's move to better position itself in the market points to a general market strategy that pits price right up against customer experience. And, even if Amazon's first version of the tablet had some lackluster reviews, the latest product suite appears to rectify earlier shortfalls.

As ReadWriteWeb lays out in detail, Amazon takes a "Sell Now, Make a Profit Later" approach, and Bezos emphasized that the company wants to align with customers (at a more competitive price point) and will make money after the initial hardware sale when consumers use the device. Apple, however, sells products at a much higher price point, which means it counts on making profits on its hardware rather than the services or apps its sells after the fact.

MarketWatch also points out that Amazon isn't only going to bat with Apple; investors see Amazon's tablets directly competing with Microsoft's upcoming Surface tablet and Google's new Nexus tablet.

As in the smartphone market where Apple and Samsung (via Google's iOS) are slinging it for market share, the tablet sector is looking to become a horse race with a handful of players charging forward and a bunch of secondary players picking up the scraps. Gartner forecasts that media tablets sales could reach 119 million units in 2012, up from 60 million units last year.

Meanwhile, in the secondary market, even a big-box toy store wants in on the potentially lucrative tablet segment. This week, Toys R Us said it was launching its own $150 version for kids, including WiFi connectivity, extensive parental control features, and 50 pre-loaded apps. And, as a side note to the competitive picture of the smartphone market, Amazon may not have announced its smartphone plans just yet, but there is all sorts of chatter about it being a possibility somewhere down the line.

With the field still open and consumers still deciding where their loyalties lie, each major company in the field is putting a stake in the ground. In a few quarters, we should see which strategy took the gold medal home.