Why 2010 Will Be the Year of the Tablet

After years of enticing rumors, ambitious prognostications and flat-out blather, 2010 may finally be the year that the tablet PC evolves from being a niche device to becoming a mainstream portable computer.

The tipping point comes via word to Wired.com from a well-connected industry executive that mainstream heavyweights Dell and Intel are collaborating on a touchscreen tablet due for release next year. Though our source has learned little about specifications of the device, what’s apparent is that the tablet will serve as a subscription-based e-reader for displaying newspapers, magazines and other media, giving Amazon’s Kindle — particularly, the nearly $500 large-format DX model — a run for its money.

As notable as the format is the business model: The tablet will be free for consumers who opt into a contract subscribing to one or more digital media subscriptions, according to our source. That’s similar to how telecom companies currently subsidize cellphones when customers agree to two-year contracts.

Our source, who requested to remain anonymous due to a non-disclosure agreement, said the companies are aiming to launch this product in about six months.

Dell and Intel are just the latest examples of a growing trend. MKM Partners analyst Tero Kuittinen said he, too, has heard rumors about not just Dell, but also handset makers Nokia and HTC delivering tablets by end of first quarter 2010. Nearly everyone has now confidently reported that Apple is launching a tablet by early next year. Singapore start-up Fusion Garage and TechCrunch are rushing to release the CrunchPad touchscreen tablet by this November.

Market research firm Display Search now projects the touchscreen market will triple in the next few years, from $3.6 billion to $9 billion.

“The iPhone was a big catalyst for the whole touchscreen industry, even if it’s just from a 3.5-inch mobile phone,” said Jennifer Halgrove, an analyst and director of display technologies with Display Search. “It encouraged people’s imaginations, and now companies are saying, ‘Oh, I can make a bigger one, and I can also have this user friendly interface.’ That really opened this industry.”

The idea of the tablet computer is nothing new to the tech industry. The development of tablet PCs can be traced as far back as 1888, when the United States Patent office granted a patent to electrical engineer Elisha Gray for an electrical-stylus device for capturing handwriting. In more recent years, plenty of hardware companies, such as Hewlett-Packard and Acer, have presented tablets that have only succeeded to fulfill a niche. Controlled with a stylus on a touch-sensitive “digitizer” screen, tablet PCs have traditionally been tailored toward artists and designers, failing to break into the mainstream.

But in recent years, costs of touchscreen components and software have been declining, and new types of touchscreens are emerging in the display market, Colegrove said. After stylus-controlled digitizer touchscreens came resistive touchscreens, which were very cheap to produce but suffered from low durability and poor transmittance. Then, a newer technology called capacitive touch became available, in which electrodes sense a user’s fingers on the X and Y axes, negating the need for a stylus.

In 2007, Apple featured capacitive touch technology (which it marketed with the more friendly term “multitouch”) in its iPhone and iPod Touch, which have sold 40 million units worldwide to date. Clearly, there is a mainstream audience for these keyboard-less computers, and Apple opened the doors with a superior user interface.

“The touch-based user interface is something we got from the handset market,” Kuittinen said. “And now that you have this innovation, it’s easier to go back to the tablet concept, and say, ‘Wait a minute, let’s add this.’ All of a sudden the device is a lot more appealing and sexier, especially since you have multitouch.”

A $0.00, media-centric tablet from Dell and Intel would certainly be competitive against Amazon’s Kindle in terms of price. Who would buy an Amazon Kindle reader if a free tablet were made available? The Kindle 2 costs $300, and the large-format Kindle DX runs for $490 — and even after purchasing a Kindle, consumers must still pay for content.

At Amazon’s Kindle DX launch event in May, The New York Times teased the idea of subsidizing longer term subscription commitments, but only in areas where “home delivery is not available.” Still, no such subsidy model has yet come into fruition for Amazon’s Kindles.

The idea of opting into a contract might initially sound like a turn-off, but Kuittinen told Wired.com that for cellphones, carrier-subsidy has been an extremely successful method to reel in customers. He said he would expect similar results with a subsidized tablet.

Kuittinen added that he has heard the Dell tablet would measure 5 inches — slightly larger than an iPhone but smaller than a Kindle. However, he said he is skeptical about Intel’s involvement with the product. Given the nature of the company, Intel would provide the guts of the device — perhaps a low-powered processor such as the Atom, which is currently used in netbooks. Kuittinen said this processor is not adequately energy-efficient to power a tablet PC compared to the ARM-based chips used in iPhones and devices running Google Android.

“There’s really no other viable alternative,” he said. “Android has such a strong moment right now. It’s going to be so much easier to develop for it.”

The low cost of Intel’s Atom chips would help keep the a rumored device’s overall price down in order to make subsidy not too hefty for content providers involved. But the software would be the key ingredient to drive the success for this device, and an Intel-based machine would either have to run a Windows or Linux-based operating system.

A tablet produced by Dell and Intel would most likely run a mobile version of Windows 7. In presentations marketing Windows 7, Microsoft has been heavily promoting the upcoming operating system’s support for multitouch. Windows 7 is slated for an October 2009 release.

The challenge for Dell and Intel is unlikely to be the creation of the product, but rather cementing negotiations with content partners. The companies will find it difficult convincing large newspaper companies to convert from being an advertisement-based business to a fee-based business. However, they might be more open to the idea if Dell and Intel keep their tablet at a low cost.

Intel and Dell declined to comment on this story.


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