By now, it's a
that tablet sales will surpass those of the PC. The only question
that remains is: When?
That day is not too far away, if Sameer Singh, head analyst at
technology incubator BitChemy Ventures is to be believed. According
to Singh's projections, global tablet shipments will increase to
nearly 80 million in the fourth quarter, while PC shipments will
slide to around 70 million to 75 million.
"These shipment estimates could be affected by the pace of low cost
tablet penetration in emerging markets and any changes to the
) operating system," the analyst said. "However, given the scale of
the figures, I can say with confidence that quarterly tablet
shipments should overtake those of PCs by late 2013," Singh told
Because the biggest area of growth in the tablet market right now
is in emerging markets, where lower-end gadgets sell the best,
Singh's forecast is good news to the likes of
), who have managed to grow their market share relative to market
). Google and Amazon's sub-$200 tablets sell well, but they do not
earn profits for their firms.
According to research firm IDC, tablets running Android will
increase their market share to 46% in 2013, compared with 42% last
year. Apple's share, meanwhile, is projected to take a hit and fall
to 46% from 51% in 2012.
Of course, Apple is selling plenty of iPads despite the market
share hit. The Cupertino, California-based company shifted 19
million iPads in the first three months of 2013, which represented
a 65% jump from 2012. Year-over-year sales of iPhones grew a
relatively paltry 7% to 37 million in comparison.
But the continued growth in iPad sales posts a problem for Apple.
In order to fend off Google, Samsung, and a slew of Asian
(SHE:000063) who produce cheap tablets, Apple has had to introduce
cheaper versions of the iPad, which has eaten into sales of the
more expensive 9.7-inch iPad. Many analysts have said that the
popularity of the lower-priced iPad Mini was a big reason why
slid to 37.5% in 2013 from 38.44% in 2012.
Traditionally an enormously profitable company, the fall in Apple's
gross margins has worried investors, some of whom think Apple has
transitioned from a high-growth company to a
) or Microsoft - a mature, profitable but low-growth company that
appeals to value investors.
But Apple's move to accept lower margins on the iPad to hold on to
its tablet market share will prove to be a winning strategy in the
longer-run, says Farhad Manjoo of
Manjoo likens the iPad Mini to the iPod Nano or iPod Flash, saying,
"In that business-unlike in the phone market-Apple began by
creating a category-defining product and then constantly expanded
its lineup to cover every price point and usage scenario." Once
customers are hooked onto the Apple ecosystem, they are then
unlikely to jump ship to Samsung or other competitors in the
future. Profit share follows market share-Apple can now make money
from its app store." (iPad app revenue
between January 2012 and January 2013.)
By releasing the cheap iPad Mini, Apple has lowered its overall
profitability, one of the factors dragging down its stock price.
But, as in the iPod business, the short-term profit loss will help
solidify long-term dominance. Here's the lock-in story again: Apple
is certain that people who jump on the iPad bandwagon today will
stick with it for life. Even if your iPad Mini purchase doesn't
help Apple's bottom line very much, you'll buy lots and lots of
apps for your device. Then, when the time comes to buy a new
tablet, you'll have little incentive to switch to Android and have
to buy all new apps. All those users will create a network-effects
advantage, too-developers will keep creating apps for the iPad
because that's where the users are, which will help attract more
users to the iPad, which increases developer interest, and so
Clear evidence for the success of Apple's lower-margins,
higher-share iPad strategy can be seen in China, which is the tech
giant's second-largest market. According to Beijing-based Umeng
Analytics Platform, the iPad represented an
of the China tablet market in the fourth quarter of 2012.
"When people think of tablets, they buy iPads," said Linda Jiang,
Umeng vice president of business development. "Android tablets
aren't gaining any significant market share."
Given the iPad Mini's success in an emerging market like China, the
obvious question to ask Apple CEO Tim Cook is, isn't it time to
produce a lower-end iPhone?
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