Apple Faces $65 iPad Rivals in China

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Apple may have surged ahead with tablet sales but the competition is heating up in China with increased shipments at ultra-low prices giving consumers more options than the sector-defining iPad.

The iPad, and its derivatives currently hold around a 80 percent of market share in the country, according to Chinese analysis firm Umeng. Analysts from investment bank Nomura recently visited Shenzen and sampled Apple's white-box rivals - products that are created by one company and can be rebranded by another.

"We found many iPad-like white-box tablets in Hua Qiang Bei, Shenzhen's largest consumer electronics mall. These products are sold at retail prices ranging between CNY400-1200 ($65 - $195)," Nomura researchers Leping Huang and David Hao said in a research note.

(Read More: Apple Announces New iPad With More Storage)

Cheaper rivals are a big threat for Apple because China is now the company's fastest growing market. Apple's revenue from Greater China grew 67 percent year-on-year in the first quarter, far outpacing growth of 15 percent in the Americas and 11 percent in Europe.

From www.ramos-tablet.com

Ramos X10 tablet

Plus, the competition in China isn't using older technology. The 7.85 inch Ramos X10 which retails at around $145, has the latest quad-core processing technology, and is considerably cheaper than the iPad Mini, priced around $340.

Apple iPad competitors in China are also using the latest screen technology, according to Nomura, giving them improved color and viewing angles. All added it up, it means it's harder to differentiate between tablet models, Nomura said. Other competitors it cited were the Yuandao N90 ($145), Ainol NOVO10 Hero ($160), the Teclast A11 ($193).

(Read More: Best Buy Slashes iPad 3 Price, Sets Samsung Store Date)

Worldwide shipments of tablets are set to more than double over the next three years as mobile devices eclipse personal computers. Global shipments are forecast to total 197 million units in 2013, a 69.8 percent increase from 2012 shipments of 116 million units, according to research firm Gartner, and reach 468 million in 2017.

"Lower prices, form factor variety, cloud update and consumers' addiction to apps will be the key drivers in the tablet market," Ranjit Atwal, research director at Gartner said in a press release as the data was released.

Image from www.teclast.org

Teclast A11

"Growth in the tablet segment will not be limited to mature markets alone. Users in emerging markets who are looking for a companion to their mobile phone will increasingly choose a tablet as their first computing device and not a PC."

In emerging markets, like China and India, tablet shipments more than doubled in 2012 over the previous year, according to IDC Insights.

(Read More: Is China Trying to Take Apple Down?)

"The market in China is very polarized. The high end wants iPad and [it's] the low end that turns to white-box. Nothing in between is really picking up in China," Carolina Milanesi, an analyst for Gartner told CNBC.com.

"Users look at tablets as a cheaper computing device rather than a status device for the time being and quality has improved dramatically over the past year. We also need to remember that hardware is the most important part over ecosystem."

Image from www.ainolstore.com

The Ainol NOVO10 Hero tablet.

But Nomura does have some reservations about the hardware when looking in more detail at the white-box products that are flooding the Chinese market.

"Although the responsiveness of these models is good in general, our discussions with retailers indicate that battery quality is a major concern on these models," it said in the report.

"We heard that some white-box vendors use smaller size or poorer quality battery or PC-type memory in order to save costs, which in the end may hurt consumers' confidence in this product category."

White-box smartphones account for over 500 million units a year, according to Gartner's Milanesi, and are far from being edged out by bigger brands. She expects white-box tablets to be less important but certainly play a role in future market share.

—By CNBC.com's Matt Clinch; Follow him on Twitter @mattclinch81