Here’s Why Microsoft Decided to Build Its Own Tablet

BY Jason

Published 25 Jun 2012

Last week Microsoft unveiled its own tablets called Microsoft Surface running Windows 8, which will not only compete with Apple’s iPad and other Android-based tablets, but also Windows 8 based tablets from their OEM partners such as HP, Dell, ASUS etc.

If you were wondering what pushed Microsoft into making their own tablets and competing with their own OEM partners, The New York Times‘ Nick Wingfield provides some interesting background behind Microsoft’s decision.

While we all know that Microsoft was worried about Apple’s iPad, it’s not entirely the reason that pushed Microsoft into creating its own tablet.

Here’s an excerpt from The New York Times article:

 Microsoft learned through industry sources that Apple had bought large quantities of high-quality aluminum from a mine in Australia to create the distinctive cases for the iPad, according to a former Microsoft employee involved in the discussions, who did not wish to be named talking about internal matters.

The executives were stunned by how deeply Apple was willing to reach into the global supply chain to secure innovative materials for the iPad and, once it did, to corner the market on those supplies. Microsoft’s executives worried that Windows PC makers were not making the same kinds of bets, the former employee said.  

The reason PC makers like HP, Dell, etc were not making the same kinds of bets was because Intel and Microsoft extract most of the profits, so they are forced into making computers as cheaply as possible. Meanwhile, Apple gross margins across its iOS product line are approximately 45%. This allows Apple to go all out to make awesome hardware.

Microsoft probably also had the benefit of getting early access to the Windows 8 tablets their OEM partners were planning to launch. After looking at the OEMs launch plans, Microsoft realized that it will never be able to compete with Apple’s tight hardware and software integration if it depended on its OEM partners and pulled the trigger to make its own tablets.

Experts believe that Microsoft will get out of business of making its own tablets and it launched the Surface tablets to give their hardware partners a wake up call.

But for that to happen Microsoft would have to let go of some of the profits, so that their hardware partners can invest in building innovative devices running Windows, which we doubt will happen. It will be interesting to see how OEM partners approach their relationship with Microsoft going forward.

You can read The New York Times article by following this link.