Apple may also have succeeded in using the size of its anticipated production (two or more million units per month is a significant order for any component supplier) to secure cheaper component prices.
Given too that Foxconn benefits from its position as a manufacturer for multiple products, Apple might perhaps be able to secure preferential production deals (though let's hope the workers have a better time than they did earlier this year).
These three potential reasons suggest ways in which Apple can drop its tablets at prices competitors can't match -- while also remaining profitable.
Those who argue Apple isn't prepared to play on price shouldn't ignore the company's realization that it is involved in a platform war. In a war like this one, greed may not be good. Market share is what counts.
There's one more strand
Carriers in the UK, Japan, and other territories are beginning to offer heavily-discounted Wi-Fi/3G iPads to customers signing-up for long-term data access deals. In Japan, Softbank is even offering the iPad for free.
These low-cost deals clearly mean Apple is now able to play yet another game, meeting subsidized Android devices with subsidized iPads. When iPad 2.0 ships, will Apple continue to offer iPad 1 at lower or subsidized prices in order to scoop up more of the low-end market?
We'll know more next year, perhaps as soon as February.
What I think is going to happen:
Android-powered devices will claim some of the tablet market, but Apple will maintain strong sales and a leadership position. Expectations on price complications will prove unfounded.
I do not however expect Apple to maintain a Microsoft-like 95 percent share of the industry -- for one thing, this does no good as it opens the company up to monopolistic control charges; for another, that kind of share is unrealistic -- it only happened on the desktop due to Microsoft's proven unlawful business practices.
Apple will continue to deliver the most advanced tablet devices at competitive prices, and will sell them in their millions. Some consumers may prefer/need less well-featured tablets, but Apple will maintain a leadership position.
In time, Apple will diversify its tablet range in order to corner wider segments of the market.
This story, "iPad 2.0: Apple Plans Valentine's Day Massacre?" was originally published by Computerworld.