Notebook manufacturers and vendors including Asustek Computer and Micro-Star International (MSI) were taken aback by the unexpectedly low entry price of $499 announced by Steve Jobs for Apple’s iPad in Media Event of Jan 27. This consumer friendly price announcement has not only surprised all but forced them to reconsider and re-evaluate their price strategies for the tablet PC market for their upcoming tablet models.

ipad-books

The vendors originally planned to offer prices 20-30% lower than the Apple iPad, while it was generally expected the device to cost as much as US$1,000. The price of US$499 at entry has caught vendors by surprise. This would mean that they will now have to re-adjust their prices even lower to attract consumers. Manufacturers however, will be reluctant to undercut the iPad price and start a pricing war for fear of eliminating profit margins. We have already seen that how the plunging netbook prices have reduced profit margin in that segment to almost razor thin despite the fact that their sale have exploded.

Starting a price war at threshold below US$499 raises concerns that any profitably will be driven out of the newly born tablet PC market, before it even has a chance to take off. Vendors are currently evaluating their strategies hoping to avoid price competition and maintain a reasonable profit margin.  [Via Digitimes]