iPad 2: Big trouble for Android tablets?

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Apple's Steve Jobs taunted tablet competitors at the iPad 2 launch with this slide.

(Credit: James Martin/CNET)

We've all known more or less what was coming for a while. The iPad 2 was going to get slimmer and lighter, have a faster processor and better graphic engine, as well as sport cameras in the front and back--oh, and the already impressive battery life would be about the same. We also knew that if past Apple product upgrades were any indication, the new, improved iPad was going to be the same price as its predecessor. And it is, with the Wi-Fi-only version of the iPad 2 (16GB) starting at $499.
So what's this all mean for Android tablet makers? In a word: ouch.
To be fair, the folks at Motorola, Samsung, and BlackBerry-maker RIM knew what was coming, too, and there wasn't much they could do it about. The Motorola Xoom, the first tablet to run Android 3.0 for tablets (also referred to as Honeycomb), has similar specs to the iPad (see Mac Observor's spec comparison chart here).
It, too, has goodies like a dual-core processor, front- and rear-facing cameras, and HDMI out (Apple makes you purchase a separate cable). But it's slightly heavier than the iPad 2, weighing a shade more than the original iPad. And its first iteration,with built-in Verizon data services, costs $799--that's $70 more than the equivalent 32GB iPad 2 (with built-in AT&T or Verizon 3G).
Motorola has hinted that a cheaper, Wi-Fi-only version will be available at some point, but it has yet to officially announce it. Dumb. It's also said that the Xoom is 4G capable, yet you have to send your Xoom in to get it upgraded. Also dumb.
At least the Xoom is available for purchase. Many other tablets, like the much-hyped BlackBerry PlayBook and HP TouchPad (both non-Android devices), are still a few months off. And it's unclear just what sort of significant advantages they might offer over the iPad 2, except that they're not Apple products--and some people would simply prefer to go with an Apple alternative.
I don't blame them. Competition is good. But with the iPad being so solid out of the gate and Apple's marketing machine firing on all cylinders, even if you equal Apple on the specs and features front, if you can't beat it on price--by a significant margin--you're in trouble. Tie goes to the incumbent here. And the winner right now is Apple.
Alas, the tablet space isn't the PC space, where Windows still holds a dominant position and PC makers can undercut Apple with lower-priced machines. As it stands, Apple's the dominant player in the nascent tablet space, and it's been able to strike market-leader deals on parts, which has made it very difficult for others to compete.
Nor is this the smartphone space, where carrier choice remains a big factor and more-affordable Android models with impressive features and designs have become very capable alternatives to the iPhone. Also, the BlackBerry remains strong, and there's more differentiation in the smartphone arena, especially when you consider how many people prefer physical keyboards instead of the virtual-only option found on the iPhone.
A tablet, however, is basically a tablet. Maybe there's some potential for a laptop/slate hybrid, but the reality is that the tablet is what it is: a slab with a touch screen, the thinner and lighter the better.
In fact, at this moment in time, the tablet market appears to have more in common with the MP3 player market. You remember that story? The iPod came along and quickly took a big chunk of the market. Sony was too worried about DRM issues to counter with anything. And others, like Creative Labs, offered compelling alternatives, but Creative couldn't outprice or out-market Apple. Microsoft gave it shot with the Zune, and even though the Zune HD was a really nice product, it wasn't better than the iPod Touch--and it wasn't any more affordable.
So what should makers of Android tablets do? Well, they probably won't--and shouldn't--give up. But they do have to figure out a way to make their products appear more affordable than Apple's, as well as differentiate them--and that doesn't mean just touting Honeycomb (Android 3.0) and the Android ecosystem.
Unfortunately, the fact that a slew of very similar-looking Android-based tablets are coming to market this year actually works in Apple's favor. Why? Because it creates confusion for the consumer (which Android tablet should I get?) and makes the iPad 2 stand out even more as the simple, safe choice.
Ultimately, the most logical play here is to go where Apple isn't. And that means going smaller and more affordable. We're talking Galaxy Tab land. As proven by the $249 Nook Color's success, which is probably the best-selling Android-based tablet on the market right now (Barnes & Noble hasn't reported sales figures yet), there's a big opportunity in the 7-inch tablet size. You hit that space with something slim and well-designed that offers decent performance at a reasonable price for a Wi-Fi-only model ($299 or so) and you're going to do well.
Of course, it's not quite as simple as that, and it remains to be seen whether manufacturers can make a worthwhile profit at those price points. But that's where manufacturers need to go. And they'd better go there soon, or Apple will get there first with its own iPad Mini.