PriceAngels Cool Gadgets at the Right Price - China Electronics Wholesale Store

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales to buy additional rights.At $129, the 7 inch tablet PC’s price tag is nearly cheap enough to have come from one of China’s many no-name electronics brands.

But the 7-inch device is instead one of the newest products from Asus, a Taiwanese brand better known for its relatively pricey notebooks and hybrid notebook-tablets.As PC sales fall, computer makers are hunting for growth by launching a slew of small, cheap tablets, similar to Apple’s popular iPad mini.

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Analysts say the decision to target the mass market with increasingly cheap tablets risks endangering already slender profit margins – but PC makers may not have much choice.“Even though it’s not a very profitable business to go into, they have to be there in order to stay relevant,” says Pin Chen Tang, an analyst with Canalys. “It’s kind of like, ‘If I don’t do it, the other vendors will do it, and I will lose my brand.’

Brands including Asus, Acer, Hewlett-Packard and Lenovo have all in recent weeks announced or brought to market Android 10 inch tablets priced under $200, including Asus’ $129 MeMO Pad HD and HP’s Slate 7, priced at $170.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights.

Asus wants to put a tablet “in the hands of every consumer”, says Jeff Yang, the company’s marketing chief, who declined to comment on the tablet’s margin. “We would like to transform their expectations about value.”Acer says it expects its focus on lower-end, ”value” tablets will help it more than triple its tablet sales from the 1.8m it sold last year.Cheaper small tablets are “the new battlefield for major PC [brands],” says Alberto Moel, an analyst with Bernstein, the brokerage.

The new launches come as PC brands are increasingly trying to experiment with new types of devices as they try to offset declining core PC businesses.As well as pushing more aggressively into 8 inch tablet – a business led by Apple, Samsung and Amazon’s Kindle – PC brands are testing consumers’ interest in convertible devices that flip between being a notebook and a tablet.

The move towards smaller, cheaper tablets means average selling prices have fallen 12 per cent to $461 since the beginning of last year, according to Canalys’ estimates.The trend resembles that in smartphones in recent years. Chinese whitebox brands, powered by cheap chips made by Taiwan’s MediaTek, have driven down the cost of high-powered smartphones to around $100.

That commoditisation, which happened in emerging markets faster than many expected, means brands such as Motorola have struggled against competition from newcomers.MediaTek is also in part behind the move into low-cost tablets, although its chips are also used in more than just whitebox brands. For example, Asus’ MeMO device includes a powerful quad-core chip that MediaTek launched last month, while new small tablets from Acer and Lenovo also use MediaTek chips.

The chip designer, based in Taiwan, in April upgraded its forecast of sales of chips for tablets for sale from 5m-10m to up to 15m this year.But analysts say the new tablets are unlikely to help the tablet brands as much as they are boosting MediaTek.Kevin Chang at Citi estimates Asus’ Memo could generate an operating margin of 1-2 per cent if volumes are high – far below the company’s 5.3 per cent operating margin last quarter.

“Android tablets are too unprofitable,” Mr Chang wrote in a note following this month’s Computex trade show in Taipei. He also raised concerns that “the sharp price decline and specification improvement of tablets” could come at the expense of PC companies’ higher margin notebook business.