As aggregators, such as Amazon, focus on tapping into the tablet device market, there is a growing challenge for traditional PC brands such as Taiwan’s Acer Inc (宏碁) and Asustek Computer Inc (華碩) to achieve their tablet shipment targets, JPMorgan said.
JPMorgan’s remark came after the Chinese-language Commercial Times and Digitimes reported last week that the world’s No. 1 Web retailer, Amazon.com Inc, would likely launch its first Android-based tablet in the second half of this year to compete with Apple Inc’s iPad.
The reports, which cited sources in the Taiwanese hardware supply chain, said Quanta Computer Inc (廣達), the world’s largest notebook computer maker, had received orders to work on the Amazon tablet, with the touch-panel supplied by E Ink Holdings Inc (元太), the world’s No. 1 e-paper display maker.
As tablet devices are likely to shift the focus onto “user interface, content availability and ease of access, rather than performance or hardware specifications,” JPMorgan said it is a natural move for content aggregators — be it online retailers such as Amazon, social media companies or music labels — to jump on the tablet bandwagon.
“We believe that these kinds of non-traditional players getting into the hardware market in tablets could diminish the opportunity for traditional PC vendors,” JPMorgan analysts Gokul Hariharan and Alvin Kwock (郭彥麟) said in a research note released on Monday.
Hariharan and Kwock said they based on their rationale on the idea that if content aggregators launch their own devices, they would have a different profit source and business model from the traditional hardware makers, allowing them to enter the market with competitive prices.
Content aggregators could also enjoy lower marketing costs than traditional hardware makers thanks to their own retailing model, the analysts said, adding that tablets from these content aggregators could be much lower in price than Apple’s products or other premium brands, perhaps cutting prices to between US$200 and US$250 a unit much quicker than traditional hardware vendors.
Moreover, once cloud-based storage and faster download speeds become widely available in the future, Internet companies such as Amazon and Google Inc could have an advantage over hardware makers, the analysts said.
“We feel that this could open up new sales channels as well as put more pressure on traditional hardware vendors, who compete solely on price/performance,” Hariharan and Kwock wrote.
Instead, JPMorgan said Quanta would stand out as a better investment target because this company has been diversifying its business from traditional hardware manufacturing to non-notebook production, including cloud-computing solutions, which boasts better gross margins.