Google Nexus at Google I/O
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With the Google (NASDAQ: GOOG) I/O conference coming up in less than a month rumors are swirling about the potential for Android 5.0, Jelly bean, launching at Google I/O and what the Google giveaway will be at this year’s conference. In past years, participants were given Samsung Galaxy Tablets, Motorola Droid smartphones and HTC EVO 4G’s among other devices. This year with the potential launch of a full line of Nexus devices from multiple manufacturers, a Google designed low priced Android tablet could not only be the giveaway at Google I/O, but the beginning of a new page in Android tablet success.
Gartner estimated that 63.6 million tablets were shipped in 2011, a 261% increase year over year. IDC estimated that in the third quarter of 2011 the Apple (NASDAQ: AAPL) iPad made up 61% of tablets sold, a drop from its previous 75% market share but still a strong leader in tablets. Android has just over a third of the tablet market share due in large part to strong sales of the Amazon (NASDAQ: AMZN) Kindle Fire and Nook Tablet. Strategy Analytics estimated that these two tablets combined made up 40% of all Android tablets sold. Both of these tablets use forked versions of Android with the Google services stripped out so Google does not profit from them, but they do profit from Google’s Android operating system. The Nook & Fire have gained so much success because they are priced around two hundred dollars as opposed to the four hundred dollar and higher iPad.
Android has had somewhat limited success in taking on the two year old iPad, which has sold over 67 million units, and though the iPad doesn’t have quite the 75% tablet market share that it used to have it still dominates the tablet market. Further the most popular non-iPad tablet is not a Google Android tablet, but rather the Amazon Kindle Fire, which comes with Amazon’s marketplace, ebook service, music service, browser and video streaming.
This will all change with a stock Google tablet, part of the soon to be stock Nexus lines of Android devices. The rumored Google Nexus tablet would be a seven inch tablet co-branded by Google and Asus, who will manufacturer the tablet. Supposedly launching in June it will have an initial run of 600,000 units with estimates that it could sell two and a half million units by the end of the year. Asus already makes a popular Android based tablet, the Asus Transformer, and there were earlier rumors that the Google Nexus tablet would be based off of the Asus MeMo 370T tablet that costs $250, though this did not come to pass. In fact a Nexus tablet built by Asus has recently appeared on a benchmarking site running Android 4.1.
Along with being designed by Google and running stock Android, either ICS Android 4.0 or Jelly Bean Android 5.0, price is going to be a key issue for the Google Nexus tablet. The two most popular Android based tablets the Nook and Fire are both around two hundred dollars while the Nexus tablet should sell for roughly that price as well. This will undercut the iPads price while matching the two most popular non-iPad tablets.
A potential reason that the Nexus tablet didn’t debut in May based off of the Asus 370T is that Google wanted to get the price even lower than the $250 370T. A high quality, low price Nexus tablet is now a possibility running Nvidia's (NASDAQ: NVDA) recently announced Project Kai. This project is designed to bring the quad core Tegra 3 chipset that is the first quad core chipset in phones and only present in a few high end smartphones right now, to deviecs that are more affordable. Nvidia has stated that Project Kai would be affordable enough to ship on $200 tablets, the exact price of the Kindle Fire and the target price for the Nexus tablet. This chipset could be present in the Nexus tablet as that would allow it to have better hardware performance than the Fire and Nook tablets while still matching their prices. Nvidia’s project Kai could also serve as a reference for future Android tablets that have thus far suffered from underwhelming user experiences and high prices.
This is not the first Nexus tablet rumor we have heard this year, but Google needs a strong reference design for an Android tablet as thus far the most popular Android tablets are not under Google’s control and all Android based tablets continue to take a back seat to the iPad. Gartner estimates that by 2015 326 million tablets will be sold, which would be over half of all PC’s sold. Windows 8 is going to launch this year with an ARM version and a new Metro interface designed to run on tablets. This new version of Windows could also run on the Nvidia project Kai hardware so it is even more important that Google establishes itself with a high quality low cost tablet.
Thus far Google’s Android platform has taken the second place to the iPad almost by default as there are no other major tablet players, this will change as Windows 8 enters the market. Thus this first Nexus tablet will not be about making Google or Asus a lot of profit, IHS iSuppli estimates that each Kindle Fire costs Amazon $202 to make, thus Amazon loses roughly $3 per Fire sold and even if the Nexus tablet is somehow slightly cheaper to build it will have very slim to no margin. The Nexus tablet is about showing the potential for Android on a budget tablet, becoming a reference for the future and ushering in a new wave of Android tablets that can compete against the iPad, as well as the future Windows 8 tablets and the Amazon Fire.
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