Just two weeks after its introduction, Amazon’s Kindle Fire already is shaking up the market, with the device expected to surpass all other iPad rivals to take second place in the global media tablet business in the fourth quarter, according to a new report from iHS (http://www.isuppli.com).

Coming up from zero in the third quarter, Amazon will ship 3.9 million Kindle Fire tablets during the last three months of 2011, according to a preliminary projection from the IHS iSuppli Display Materials & Systems Service from information and analysis provider IHS. This will give the company a 13.8% share of global media tablet shipments in the fourth quarter, exceeding the 4.8% held by No. 3 Samsung, and second only to Apple’s commanding 65.6% portion of the market, as presented in the table below.

"Nearly two years after Apple Inc. rolled out the iPad, a competitor has finally developed an alternative which looks like it might have enough of Apple’s secret sauce to succeed," says Rhoda Alexander, senior manager, tablet and monitor research for IHS. "Initial market response strongly suggests that Amazon, with the Kindle Fire, has found the right combination of savvy pricing, astute marketing, accessible content and an appropriate business model, positioning the Kindle Fire to appeal to a brand-new set of media tablet buyers. The production plans make it clear that Amazon is betting big on the product."

IHS now predicts global media tablet market shipments will amount to 64.7 million units in 2011, compared to the previous forecast issued in August of 60 million. The total shipment level represents 273% growth from 17.4 million units in 2010. The forecast for the following years also has been increased, with shipments expected to rise to 287.2 million in 2015, up from the previous forecast of 275.3 million, as shown in the figure below.

While Apple remains dominant in the media tablet market, speculation is rife that the company will respond to the Kindle Fire’s aggressive pricing with a lower-cost version of the iPad.

A far more likely scenario is that Apple also may reduce the pricing on the iPad 2 when the company introduces the iPad 3. This will provide a value alternative for entry-level users in the same way that the company continued to offer the iPhone 3 when it rolled out the iPhone 4. This approach would allow Apple to maintain its target profit margins on both the iPad 3 and the iPad 2, while offering end-users an ever-expanding family of products.