I think there's a ton of room at the bottom. There was a time when DVD players and home computers were out of the reach of the poor or lower middle class. Most (responsible) people can't afford a $500+ tablet, but the promise of tablet computing still applies to them. It's a lie to say that the promise of tablet computing can only be accomplished in a $500+ package. There's tons of room for tablets that are $250 or less - see all the "low end" phone providers that now have Android offerings.
There's room at the bottom in terms of market share, but not in terms of profits. Android has captured a bigger chunk of the market, but Apple is reaping most of the profits (since their devices are high margin) and is therefore in a much better position to innovate or leap on opportunities that come up. I mean, who wouldn't want to sit on a $120+ billion warchest?
What's going to be really interesting is when (if) the "iPad Mini" comes out. There was an article on Ars Technica last month where a reputable analyst claimed Apple found a way to manufacture iPad Minis with the last generation iPad's components. What that means is that even at $250, the device would be extremely high margin. Not only would it allow Apple to lock down the lower market segment, but also result in a huge increase in profits. From a business standpoint it seems like a no-brainer, because a cheap and yet high margin device is not something that other manufacturers can imitate.
Not really. As a consumer, I am perfectly fine with Apple making a lot of money as long as I get a high quality product with superior user experience. The way I look at it is that I am paying a premium for a much better product.
