China's second-tier and white-box players have recently turned their focuses to dual-OS (operating system) tablets and are aggressively preparing to ship these products to overseas markets.
Since the dual-OS technology only slightly increases the players' costs and devices with the feature are eligible for Intel's subsidies for Windows-based tablets, such dual-OS tablets look promising.
However, dual-OS devices are more suitable for emerging markets that have yet to see a mature development of Google Mobile Services (GMS) and these products are also expected to face challenges in terms of software-hardware integration, limiting their contribution to white-box tablet shipments in 2015, according to Digitimes Research's findings during its visits in the white-box supply chain in Southeastern China.
Currently, existing white-box dual-OS tablets are supporting either hot or cold swap technologies. The hot swap technology allows the users to switch to another OS without reboot, but the costs are US$3 more than those for single-OS devices. On the other hand, the cold swap technology, which is simpler in architecture, only has a less than US$1 increase in costs.
However, devices using either technology are able to achieve pricing that is more than US$15 lower than that for single-OS devices and by equipping their devices with 1GB DRAM and over 32GB eMMC NAND flash, white-box players are able to further raise their selling prices to help increase their gross margins
With Microsoft joining Intel to offer subsidies for white-box devices, white-box players in Southeastern China has been aggressively launching tablets combining Windows and Intel Bay Trail-T CR solutions since the fourth quarter of 2014 and achieved sales of 2.5 million units in the fourth quarter of 2014.
Seeing white-box players becoming more aggressive about releasing Wintel tablets, Intel has started shrinking its subsidies on Windows-based devices in 2015, as the subsidies are meant to help it further penetrate into the Android device market. Since dual-OS products are not named in Intel's restrictions, players have then turned to develop dual-OS products to continue receiving full subsidization.
The players are able to receive a total of US$10 in subsidies for each device from Intel and Microsoft.
Dual-OS tablets enjoy strong demand in China and almost all the new models released after the Lunar New Year holidays are equipped with the feature, currently accounting for one sixth of Intel-based white-box tablet shipments in China.
White-box players also prepare to sell these devices to the overseas markets. However, Google is wary of dual-OS devices and is looking to curb their development by tightly control its GMS.
As a result, only emerging markets such as Russia and Eastern Europe that do not yet have a mature development of GMS are expected to achieve good sales for dual-OS devices.
In addition, hot swap models, which are more popular but harder to design and require more resources to develop compared to single-OS models, will become a challenge for white-box players and its BIOS partners in terms of winning consumers' trust in their capability of software-hardware integration.
In 2014, white-box players were able to achieve growth for their Wi-Fi tablet shipments thanks to demand for inexpensive tablets with phone function, while Intel's aggressive actions to establish an x86 supply chain in China and provide subsidies for its China Technique Ecosystem (CTE) project, helped boost white-box players' shipments above 90 million units.
However, for 2015, the market has yet to see any significant innovations coming from the technology side that can greatly stimulate demand. Dual-OS technology offers a niche in the market, but challenges still lie ahead for it is the white-box tablet makers.
Digitimes Research believes the dual-OS feature will only have a limited contribution to white-box tablet shipments and the white-box tablet market is expected to see over 20% on-year drop in 2015 as overall demand for tablet continues declining.