Tablet market heats up in Brazil

As Foxconn announces that it intends to invest $12bn in a factory in Brazil to build iPads, technology commentator and writer Mauricio Longo analyzes the latest developments in the Brazilian tablet industry.

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Recently, I have read several articles suggesting that 60,000 to 100,000 iPads have been sold in Brazil in 2010.  However, can these estimates paint an accurate picture of the true dimension of the Brazilian market for tablets?

First, let’s see where these numbers come from.  First, it was reported (before the iPad went on sale in the country) that Internet service providers were estimating the number of iPads accessing major websites was in the range of 35,000 to 40,000.

Add to that number the approximately 64,000 devices that were legally imported into Brazil – you will end up with about 100,000 iPads that made it into the country.

When compared to more than 13 million PCs sold across the country, the numbers above seem to indicate that there is little demand for tablets in Brazil.  This assumption, however, couldn’t be further from the truth.

Brazil levies high import taxes on electronic products, which pushes prices up.  A basic model of the iPad or the Samsung Galaxy Tab is generally priced at about $1000. Tablets in Brazil have so far been priced well beyond what most Brazilian consumers can afford.

Such high prices and the delay between the iPad’s initial launch in the US and its availability in Brazil lead to a thriving gray market for such devices, which dodge all forms of customs tracking.

Additionally, Brazilians travelling to countries where other tablets are available at much lower prices – such as the Motorola Xoom and the iPad 2 – bring large numbers of devices with them, thus fuelling the gray market. While the exact number of tablets entering the country this way is unknown, it is certainly quite large.

Government support

Recognizing the potential opportunities prompted by the tablet market, the Brazilian government has been looking into bringing them under a fiscal incentive program that already covers low-priced notebooks.

This program, conceived to make computers and Internet access more accessible to lower-income families, cuts certain taxes in order to reduce final consumer prices.

Lower retail prices should not only help drive demand, but also shift some of the volume currently seen in the grey market.

The locally assembled Galaxy Tab has been the only challenger to the first-generation iPad in the Brazilian market so far, but that is changing fast. Motorola’s Xoom tablet has just made its debut in the local market with pre-sales being handled by several major retail chains.

Other manufacturers such as Asus are also producing netbooks and notebooks locally, it seems probable that its own tablet Transformer will soon hit the local market. The Transformer brings an interesting twist to the tablet concept, by offering a mobile docking station, which essentially turns the tablet into a netbook, while extending its battery life.

This combination might well turn out to be popular with students, by combining the features normally associated with a tablet with a physical keyboard for taking notes and producing papers.

Consumerization gains momentum

In the coming years, tablets will have a disruptive influence in the personal computer market, as well as the corporate IT scenario.  Since the second half of the last decade, consumer demand for computer related products has outpaced corporate demand and became the key driver for the development of new products and leading to the consumerization phenomenon.

While this trend is not yet as strong in Brazil as in some other western countries, it is certainly gaining momentum and will accelerate as more people take their personal tablets to work.

Tablets are perceived by just about everyone as personal devices almost to the same extent as mobile phones are. People keep track of contacts and appointments as well as using custom applications for note taking, reading eBooks and playing games.

When all of this becomes considered as pretty obvious, IT departments will not be able to ban people from bringing their tablets to work any more than they can prohibit usage of cell phones.

While some Brazilian companies will resist strongly to the use of personal tablets in business activities, it will inevitably happen.  The high mobility and productivity associated with tablet usage makes it inevitable that some people will use them to work on the move.

With the expected arrival of the iPad2 and the introduction of new Galaxy Tab models, as well as the expected arrival of new players such as Motorola, Asus and HP, 2011 will probably bring plenty of changes to Brazil’s IT industry.

Image by ntr23 licensed under Creative Commons.