When asked today about how Apple was handling the competition from lower-priced tablets—specifically the Kindle Fire—Apple CEO Tim Cook said, effectively, that it isn't a competition at all. Which would sound like hubris, if the numbers didn't back him up so strongly.
While Amazon did sell millions of Kindle Fires last quarter, it's highly unlikely that they pushed the 15 million iPads Apple did in the same three months. And Cook doesn't seem concerned that they'll catch up any time soon:
People really want to do multiple things with their tablets, so we don't see the limited function tablets and ereaders in the same category… I don't think that people who want an iPad will settle for a limited function.
In terms of other tablets, last year was supposed to be the year of the tablet, and I think most people would agree it was the year of the iPad for the second year in a row.
Limited function doesn't just mean hardware features, either; the Kindle Fire doesn't have a camera, sure, but how many pictures have you taken with your iPad 2 lately? The real thing holding back Android tablets is their lack of apps, says Cook:
In terms of our competitiveness, the ecosystem for iPad is in a class by itself… We now have apps totaling over 170,000 available for the iPad, and that compares to what appears to us to be a few hundred for the competition.
In other words: the razor can be as cheap as you want, but it doesn't mean a thing if the blades are dull.