I think part of the disconnect here is phones vs. tablets. Intuitively, phones seem to have kept a premium price probably being propped up by carrier subsidies (in the States). However, there's a part of the link you provided that sounds a bit hollow. We simply believe there’s a better way of doing it without extracting that much payment from end users, because there are other ways to drive revenues. That line in particular basically says, "we'll find other ways to get margins off of consumers". It also rings slightly hollow in that Motorola is losing money, LG just swung to profitability this quarter after losing money for a few years (as well as exiting the tablet market because of the inability to profit), and HTC has seen its ability to profit plumet. There are certainly inefficiencies and some companies have kept good margins (Apple and Samsung), but it's not as if most players are doing so well.
In tablets, we see really hard price competition. Amazon is selling the Kindle Fires at cost. In short, tablets are cheaper than phones with much smaller displays and smaller batteries. In a certain light, why is the Nexus 4 a full $150 more than a Nexus 7 (assuming the same 16GB storage)? Sure, miniaturization probably has to do with the cost difference,
Also, I think the comparison to laptops might not be so great. Ultrabooks aren't doing so well and we've seen huge consolidation of competition in the PC/laptop market. Heck, we nearly saw HP leave the market. Dell generates less than 5% of its income from the consumer market. Yes, we have some Ultrabooks coming in, but they aren't selling so well and seem more driven by Intel than by the manufacturers (excluding Apple here). In a lot of ways, Laptops are actually showing how this is a problem: I hate that 1366x768 resolution, but everyone uses it because it's cheap and everyone is focused on price. Yes, I can spend over $1000 and get a nice resolution, but there's this gap in the middle. I remember reading an article lamenting how Dell would try every couple years (in a half-hearted sense) to create a MacBook Pro competitor line just to get hit by a complete lack of sales as people only cared about price. And that's ok in a certain way, but it also leaves little room for innovation and risk taking (what Engadget was commenting on). If I want a Windows version of a MacBook Pro 15", what is there? Certainly, there is no Retina MBP competitor. Really, I don't want Apple to take the high end and have every Android vendor compete on price alone like laptops devolved into. Heck, laptop vendors compete so much on price that poor quality keyboards and trackpads are the norm. Any hidden place they can save a cent gets hit. I'm sure the Nexus devices have fine touchscreens, but if price becomes the only object, things like the touchscreen quality could get hit in the future. We want the lowest price for good stuff. It's easy to read processor and RAM specs, but we also want to make sure that the non-listed stuff works well. And we want to make sure that we don't get to a point where we aren't improving because we've programmed ourselves to be so cheap that we won't spend an extra $15 for something much nicer - I feel that way about trackpads.
We'll see over the coming years how it all plays out, but LG already exited the tablet market. Motorola's last tablet was a year ago? There certainly are vendors struggling and some giving up. That's not to say that there isn't some bloat in there and not efficiencies to be had. Google is a great company - great companies push the bounds. At the same time, I'd like to be sure that the level of competition will stay high - that there will be many companies able to remain competing. It's hard for us on the outside to be commenting because we don't have complete information. Google is saying things to the effect of, "well, prices are sorta coming down and we think we can make up the money in other ways like making sure that people continue to think of Google for search". According to the link, even Google's Motorola division seems to think Google's vision for pricing isn't quite fully realizable.
You might be totally right and in 5 years we'll have awesome competition at better price points than we have now and I'll have been the silly spoil-sport raining on the parade. I was mostly trying to point out that these prices may not be sustainable (at the same time, they may well be). Even if companies aren't purposefully trying to corner the market or anything, this could happen. Amazon might think that they'll make $x off of content for each Kindle Fire only to find out that people just don't buy on them, but were buying them on price alone. Then, a few years later when many companies leave the market due to price, we're left with less competition. Low prices are certainly good. We want to make sure that the prices and innovation keep going into the future.
We want low prices (that's a great thing), but we also don't want to lose options and competition in the future (that's a bad thing).
I think the idea you're getting at is an efficient price. Not too low to devastate competition, not too high to be unaffordable.
The idea of efficient prices ties up a lot of concepts, especially anti-trust concepts. You're really spot on. Consider though that there's a whole body of language that specifically outs Amazon and Google's behavior as plain anti-trust violations. E.g., Amazon bundling its book marketplace with a tablet sold below cost; Google bundling its search and advertising business on an operating system sold at inefficient cost (by sharing ad revenues on partnered devices, Google is essentially paying manufacturers and carriers to use Android).
How does Apple compete against tablet undercutting? How does Microsoft compete against operating system undercutting? Maybe the parameters have changed, and we should embrace the "better way of doing it without extracting that much payment from end users." But beware the world where Microsoft can't sell operating systems and Apple can't sell hardware. We would prefer to have that competition and innovation than none at all.
Then, a few years later when many companies leave the market due to price, we're left with less competition.
We will not have less competition because of price or dumping. We will have less competition because the natural dynamics of platforms is to tend towards monopoly, because of lock-in effects of consumer investment in stuff that works with the platform combined with the economies of scale of making things work really well with any one platform.
It upsets me that your misguided wall of a rant is taking up so much space on this otherwise interesting discussion!
In tablets, we see really hard price competition. Amazon is selling the Kindle Fires at cost. In short, tablets are cheaper than phones with much smaller displays and smaller batteries. In a certain light, why is the Nexus 4 a full $150 more than a Nexus 7 (assuming the same 16GB storage)? Sure, miniaturization probably has to do with the cost difference,
Also, I think the comparison to laptops might not be so great. Ultrabooks aren't doing so well and we've seen huge consolidation of competition in the PC/laptop market. Heck, we nearly saw HP leave the market. Dell generates less than 5% of its income from the consumer market. Yes, we have some Ultrabooks coming in, but they aren't selling so well and seem more driven by Intel than by the manufacturers (excluding Apple here). In a lot of ways, Laptops are actually showing how this is a problem: I hate that 1366x768 resolution, but everyone uses it because it's cheap and everyone is focused on price. Yes, I can spend over $1000 and get a nice resolution, but there's this gap in the middle. I remember reading an article lamenting how Dell would try every couple years (in a half-hearted sense) to create a MacBook Pro competitor line just to get hit by a complete lack of sales as people only cared about price. And that's ok in a certain way, but it also leaves little room for innovation and risk taking (what Engadget was commenting on). If I want a Windows version of a MacBook Pro 15", what is there? Certainly, there is no Retina MBP competitor. Really, I don't want Apple to take the high end and have every Android vendor compete on price alone like laptops devolved into. Heck, laptop vendors compete so much on price that poor quality keyboards and trackpads are the norm. Any hidden place they can save a cent gets hit. I'm sure the Nexus devices have fine touchscreens, but if price becomes the only object, things like the touchscreen quality could get hit in the future. We want the lowest price for good stuff. It's easy to read processor and RAM specs, but we also want to make sure that the non-listed stuff works well. And we want to make sure that we don't get to a point where we aren't improving because we've programmed ourselves to be so cheap that we won't spend an extra $15 for something much nicer - I feel that way about trackpads.
We'll see over the coming years how it all plays out, but LG already exited the tablet market. Motorola's last tablet was a year ago? There certainly are vendors struggling and some giving up. That's not to say that there isn't some bloat in there and not efficiencies to be had. Google is a great company - great companies push the bounds. At the same time, I'd like to be sure that the level of competition will stay high - that there will be many companies able to remain competing. It's hard for us on the outside to be commenting because we don't have complete information. Google is saying things to the effect of, "well, prices are sorta coming down and we think we can make up the money in other ways like making sure that people continue to think of Google for search". According to the link, even Google's Motorola division seems to think Google's vision for pricing isn't quite fully realizable.
You might be totally right and in 5 years we'll have awesome competition at better price points than we have now and I'll have been the silly spoil-sport raining on the parade. I was mostly trying to point out that these prices may not be sustainable (at the same time, they may well be). Even if companies aren't purposefully trying to corner the market or anything, this could happen. Amazon might think that they'll make $x off of content for each Kindle Fire only to find out that people just don't buy on them, but were buying them on price alone. Then, a few years later when many companies leave the market due to price, we're left with less competition. Low prices are certainly good. We want to make sure that the prices and innovation keep going into the future.