Getting Beneath the Surface of Microsoft’s New Tablet

In May (2017), Microsoft used its education market event to unveil its new Surface Pro tablet. It has been almost two years since Microsoft's last tablet announcement.

The major product update in 2017 consists of the latest processors from Intel’s Kaby Lake platform. The processor speeds and amount of user storage are the determining factors for the new Surface Pro models. The resulting models range in price from US$799 to US$2,699.

The target audience does not appear to have changed for the new Surface tablet, except for the prominence of Microsoft’s marketing to university students and staff who can receive a 10% discount at qualifying schools. However, with university students generally being budget-minded and tablet competitor OEMs offering lower-priced solutions, the results of marketing directly to higher-education have yet to be fully realized.

One of the differentiating features of the new Surface Pro is the optional LTE-Advanced modem module. LTE-Advanced delivers 2-3X times the real-world data speeds of LTE networks and meets the International Telecommunication Union’s (ITU’s) definition of a 4G network (officially known as IMT-Advanced), which requires 100 Mbps+ performance in high-speed transportation applications and up to 1 Gbps downloads when in a fixed location. While the largest mobile network operators (MNOs) in the largest LTE markets have started rolling out LTE-Advanced services, the new Surface Pro stock keeping units (SKUs) that include the LTE-Advanced modem will not be made available until sometime later in 2017 for an unannounced price. Customers that pre-order the new Surface Pro will not have an upgrade path available for 4G LTE connectivity.

Microsoft touts the new Surface Pro as, “the most versatile laptop,” although it is very much a tablet unless one of the company’s optional type covers is purchased, too. The type cover for Microsoft Surface products has been updated with this tablet launch to include a signature model (US$159.99) wrapped in a suede-like fabric called Alcantara. Alcantara is the name of the company that has been developing synthetic alternatives to animal-based materials since the 1970s; most known for making steering wheel wraps and vehicle seat covers. The marketing hype for using Alcantara surrounding the keyboard cover is that it increases durability and provides a higher-quality feel. The unknown aspect of using the suede-like material is how well it cleans up after spills and if oils from the hands wear or discolor the fabric.

Competitively, the new Microsoft Surface Pro does not offer anything significantly different than the basic Apple iPad and Samsung tablets. This will change, however, when the LTE-Advanced modem SKUs become available later in 2017, though it gives competitors plenty of time to counter the Microsoft announcement with their own LTE-Advanced solutions. Even with the updated Apple iPad Pro 10.5-inch model and the functionality to be introduced in iOS 11, the most that can be said about Microsoft’s Surface strategy is that Apple is validating the use of the digital pen, as well as split-screen and multi-tasking functionality.

The choice to position the new Microsoft Surface Pro as a laptop instead of a tablet appears to be Microsoft attempting to distance itself from the declining tablet market where Apple and Samsung continue to have a stranglehold over hardware and app market share. While some analyst firms have decided that including detachable 2-in-1 ultraportables in their tablet figures helps keep the overall numbers higher, this feels a bit disingenuous to us. ABI Research expects to continue tracking tablets and ultraportable PCs separately.

Despite Microsoft’s naming of the fifth generation Surface tablet to include “new” in the model naming, there is not a lot to get excited about just yet. The pricing keeps the new Microsoft Surface Pro at a premium level and does not attempt to appeal to a wider audience, including the education market. The opportunity for tablets to utilize LTE-Advanced later this year is the real change to the Surface line-up, though not being able to offer the functionality at launch will result in lackluster uptake from the existing user base. In contrast, had Microsoft included LTE-Advanced in its models at launch in June 2017, it would have offered a competitive advantage for audiences to consider switching from iOS and Android tablets.

Positioning the new Microsoft Surface Pro as a laptop could hurt Microsoft when also trying to market the Surface Laptop (US$999 to US$2,199) and Surface Book (a detachable 2-in-1 ultraportable with models priced from US$1,499 to US$3,199) products. At a minimum, audiences may become confused when deciding on which Microsoft-branded product to purchase.

The new Microsoft tablet remains competitive with the market leaders, and Microsoft is one of the few tablet OEMs with market growth potential. However, its success is not guaranteed. The tablet market can use a solid number-three supplier and the new Surface Pro has Microsoft continuing to remain in the chase.