At CES: Peeking into the Future of Tablets

(This story was updated to remove reference to HTC in second paragraph.)

For the last few years, the International Consumer Electronics Show, held each January in Las Vegas, has been a disappointment. In 2009 tech's most important annual gathering found itself in the icy grip of a global recession, with attendance down by 30,000. Last year the highlights included a new class of 3D televisions that are now on sale for deep discounts. Did you buy one? Apparently no one else did either.

That's the setup for this year's show, on Jan. 6-9, which is shaping up to be one of the most significant in recent memory. Many of the prevailing trends in high tech—often tidily summarized by the word "convergence"—are now mature enough to start changing the way regular people interact with technology. The HDTVs and in-car entertainment systems on display at CES will connect to the Internet; movies, music, and games will make their way to all manner of devices as the PC finally relinquishes its spot as the dominant way to access multimedia and the Web. Embodying these trends, and sure to draw most of the attention at the conference, is a torrent of new tablets from Asus, LG Electronics, Motorola (MOT), Toshiba (TOSYY), and many others—each hoping to replicate the success of Apple's (AAPL) eight-month-old iPad.

The stakes of the emerging tablet wars are huge. Apple has an early lead, with an estimated 10 million iPads sold in 2010, and is likely to keep it. But analysts believe the market is set to explode. The research firm iSuppli predicts 57 million tablets will be sold in 2011 and 171 million in 2014. "These companies aren't trying to steal away from Apple. They are betting the overall pie will expand," says Richard Doherty, research director at the Envisioneering Group, who estimates that more than 100 tablets are being introduced at CES this year.

Google's Challenge

As with smartphones, Google (GOOG) and its hardware partners, including South Korea's LG and Motorola, are in the best position to loosen Apple's grip. At CES, Google was expected to demonstrate a forthcoming version of its mobile Android operating system, called Honeycomb, customized for tablets. Microsoft (MSFT), too, was expected to preview a version of its operating system that will run across all types of devices, from phones to PCs and tablets, and is compatible with low-power, mobile-device chips called ARM processors. "Two of the most influential companies in the world are going to put a stake in the ground and say this is your personal computing platform going forward," says Jen-Hsun Huang, chief executive officer of graphics and mobile chipmaker Nvidia (NVDA).

For Microsoft, this year's CES is both an opportunity to make up for lost time and a reminder of a painful past. At CES in previous years the company has demonstrated duds such as Internet-connected watches and $12,000 multitouch tables. Last year, CEO Steve Ballmer showcased a tablet running Windows, made by Hewlett-Packard (HPQ). It went on sale in late 2010 and appealed only to a few business buyers. Windows "is still kind of heavy and optimized for devices with a physical keyboard," says Yongseok Jang, vice-president for business strategy at LG Electronics. His company plans to show an Android-powered tablet at the conference.

The new tablets will come in a variety of shapes and sizes. Some will have only Wi-Fi access, and others will also connect to speedy new 4G networks. While the iPad has no camera, many of the new tablets have two—one in the front, one in the back. Toshiba, the Japanese electronics giant, plans to announce an as-yet-unnamed tablet with a 10-in. screen, two cameras, and a removable battery. Vizio, the Irvine (Calif.) company that has seized a lead in the U.S. market for HDTVs, is unveiling an 8-in. tablet with a high-resolution screen and a front-facing camera for videoconferencing.

Apps Market

Both Toshiba's and Vizio's tablets will run Android, but neither company wants to be confined to selling undistinguished, me-too hardware. They also want a piece of the highly competitive market for mobile software apps. Toshiba says it will introduce its own e-book store and marketplace for tablet applications, while Vizio has created an interface to allow users to watch the same content and play the same games across multiple Vizio devices. Both companies will have a challenge getting customers to use their offerings rather than more popular and familiar ones in the apps marketplace provided by Google.

Chinese manufacturer Lenovo has a unique approach with what it calls its IdeaPad U1 Hybrid with LePad slate. It's actually two computers in one—a slick, 10.1-in. Android tablet that becomes a PC running Windows 7 when it connects to a keyboard. "We're showing that Apple does not have a corner on the market for innovation," says Peter Gaucher, Lenovo's executive director for mobile Internet devices.

Many past technology battles highlighted at CES have been bad for consumers—such as the Blu-ray vs. HDTV format wars, which left some early adopters stranded with useless devices. Competition in tablets should drive down prices, limit Apple's near-monopoly on digital content distribution, and stimulate a round of creativity among the small developers who write applications for mobile devices. At the last two CESs, what happened in Vegas pretty much stayed in Vegas. Not this year.

The bottom line: Roughly 100 tablets are being introduced at this year's CES. They're becoming a viable alternative to PCs.

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