Getting Harder to Beat the Tablet Bears

I’ve been defending the tablet market for some time. I still believe the form factor offers a much more inviting and natural computing environment than a traditional PC. I’ve long argued tablets are great first computers for kids, the elderly, and many in emerging markets looking to do more than their smartphone offers, but who aren’t PC literate. However, these segments alone may not be big enough in annual shipments to sustain many players in the category. At this point, and things can always change, there are a few dynamics we have to fully understand relating to tablets.

First, a great deal of tablets’ global growth and rapid adoption since 2010 has been driven by small tablets in the 7-8″ range, and very low-cost ones. Note this chart of sales and the vast majority, ~80% on average, of tablets in the “other” category are sub $150.

Screen Shot 2015-08-12 at 11.52.20 AM

Unquestionably, replacement rate extension is an issue for iPads in particularly. A behaviour we have noted with lower-cost tablets is they are treated as disposable. In markets like India and China, where low-cost tablets saw large volume sales, it was not uncommon for these to be replaced annually. This could have played a role in the surge in volume sales from these products and is also one of the reasons I think we are seeing a decline. It is these customers, who bought tablets for sub $100 in the 2012-2013 growth stage, who are now not purchasing them anymore as larger screen phones are filling their needs. I’ve shown this chart before, now updated for Q2 2015, and we have debated it, but the signals seem be clear that large screen phones are impacting volumes of low-cost small screen tablets.

Screen Shot 2015-08-12 at 8.44.42 AM

It is unclear if larger screen phablets are impacting iPad sales, or if it is purely because the iPad refresh cycle is extremely long, but I’m certain large screen phones have dramatically impacted low-cost, small screen tablet sales on a worldwide level.

However, some recent data from DeviceAtlas may provide the best signal of the shift taking place. From their latest Q2 report, DeviceAtlas shows that internet traffic from tablets is declining across the metrics their technology tracks.

Screen Shot 2015-08-11 at 2.13.03 PM

Several of the markets tracked here, such as the US, UK, Australia, and Japan, are markets where the iPad installed base is quite high (over 50% in some cases). Which means the decline in internet usage from tablets is not just coming from low-cost, small screen Android tablets. The other point to make is the iPad has traditionally, and still does, lead in nearly every country as the dominant tablet for internet usage. So, to see tablet traffic decline, knowing how much of it globally comes from iPads, enforces again that some of this decline is coming from people using their iPads less to browse the internet. How much less? I’m not sure, but we can’t argue it is not happening.

So where does that leave us? Here are a few ways to think about where the market can go.

Tablets Become SUVs: The analogy that PCs are trucks is apt and holds water. Trucks are not mass market but are specific purpose utilities. The positioning that the tablet is more like the compact car than the truck, meaning it is more mass market than a truck, was commonly used. But perhaps the tablet needs to become more capable, functional, and powerful than a compact car but not quite a truck. Maybe it needs to become an SUV.

This is perhaps why, within iPad sales, we are seeing the mix shift away from the mini to the larger screen iPad. This may also be why there is excitement around a larger iPad, the so-called iPad Pro, which will still be more portable than a traditional PC and nearly as capable.

If this happens, these classes of tablets could compete for the 500m, or more, consumer notebooks in use that are 4-5 years old, when these devices come up for replacement.

Only the iPad and Windows Tablets Remain: Another scenario to consider is Android tablets simply fade away and the only tablet makers left are Apple and those shipping Windows tablets, largely to commercial customers. Since most Android tablets sold are being displaced by large screen Android phones, this scenario could be quite likely. I’d still argue, in this scenario, the tablets becoming SUVs is still the play.

Only Upside is Commercial: Another scenario is the consumer market for tablets becomes heavily seasonal, or only large in certain years, where the regularly quarterly and consistent annual upside is in commercial sales. I use this chart often in my presentations to show the opportunity for tablets to take computers into environments the desk or lap-based PC could never go.

Screen Shot 2015-08-12 at 9.19.02 PM

We believe workers who spend most of the day on their feet and use paper-based processes in places like factories, construction sites, retail, etc, could represent an opportunity of more than 400 million jobs where a tablet is a viable solution.

The Market is Simply Not That Big:Lastly, we may have to conclude the tablet market is just not as big as we originally thought. Many believed it could be larger than the PC market, meaning north of 300m units per year. Currently, the tablet market is on pace to barely break 200m units this year, a decline of about 25 million from 2014. Of course, this could change, but I’m not as confident as I once was, even if Apple brings out a larger one.

If we do continue to see small tablets shrink and potentially become extinct, it will be time to officially start lumping tablet sales into PC sales and stop separating them. I have a model that adds all iPad Air sales into PC sales since I consider them PCs. But I separate smaller tablets into the tablet category.

Perhaps the tablet category simply goes away as the tablet evolves and matures. Maybe it is even easier to just get rid of the labels and say we have small screen computing devices and large screen computing devices.

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

30 thoughts on “Getting Harder to Beat the Tablet Bears”

  1. A few of other things maybe:

    – Even cheap tablets are getting good so throwing them away regularly is no longer required, thus driving sales further down. I recently got a $100 8″ 2GB/32GB/µSD Android+Windows tablet. It’s surprisingly good (apart from the Metro side of Windows 8 ^^). The screen looks good and at 1280×800 is very usable, the performance is fine (some Atom CPU), battery life, build, and radios are satisfactory, there are ports for everything… This feels like a keeper, as opposed to similarly priced models I got in previous years. I’m actually wondering if that same is not set to happen to the phone market. I previously had to force myself to wait a full year before upgrading, but now I’m so happy with last year’s model I can’t seem to manufacture a reason to indulge.

    – I think MS’s Surface relaunch made it clear they see tablets as competing with ultrabooks and laptops. That might be wishful thinking on their part because they’re the only ones with an established “old PC” personality to their tablets, but there might be some truth in it too. I’m surprised Apple and Google are not at least testing the waters in that direction with bigger devices, serious keyboard/desktop docks, and OS tweaks. Even Android OEMs seem shy, Asus have a well-designed dockable line but only 10″, and the 12-13″ models from Samsung, HP and Lenovo are all flawed (Samsung’s less so).

    – On the flip side of things, what makes tablets and phones a success is that they’re easy, but that makes them limited. Growing tablets to PC replacement is a bit of a squaring the circle problem: I need multiple windows, yet I dislike my Galaxy Note 10’s split screen and floating windows: 10″ isn’t much to start with… Plus Apple and Google have MacOS and ChromeOS businesses to protect ?

    – I’m not that sure about the pro market: white collars can use a regular PC at their desk, blue collar probably much prefer something they can use one-handed, strap to their wrist/belt, drop… I know my delivery guys use a 3-screen app on a phone, not a 1-screen app on a tablet. That leaves peripatetic white collars as the target market ?

  2. Listening to the western tech press, the tablet market is imploding, or has totally disappeared, when what’s actually happening is that it has ceased growing and in the latest data is exhibiting what may be a very slow decline or may be a transient blip. But it’s not really the *tablet* market that has done this, but rather the Ipad market. There’s really at least three tablet markets, and at most two of them are in trouble.

    1, as you’ve written about before, there’s cheap lightweight programmable displays, basically kiosks you can fasten anywhere and program for any purpose. This third flies almost entirely under the radar in the tech press since there are essentially no publicly traded big name manufacturers involved.

    2. Then there’s one handed reading devices that are more versatile than an e-ink reader, aka the 7″-8″ tablet market. This is the market segment that pundits are thinking of when they talk about how tablet sales are being eroded by oversized phone sales. Which is only partly true — readers are used to carrying a book and a phone around with them, after all, and even the biggest phones deliver only half the screen size that a one handed tablet does (I’ve read part of a book on a phone. It wasn’t good – the tiny amount of text visible at a time made for a confusing and fractured reading experience).

    3. finally there’s 10 inch tablets, aka the full size ipad market. Because, if we’re being honest, every other manufacturer that has tried to sell tablets in this size has either bombed or only been able to move a tiny percentage of Apple’s sales. Full size ipads were single handedly responsible for decimating the netbook market a few years ago, and that’s the market that they’re competing with — as devices that you carry around the house with you, or put in a bag if you’re going to leave home with them, which can deliver a much fuller and richer experience on their 10″ screen than any phone can on its tiny screen.

    Market 1 is doing fine but nobody pays attention to it. Market 2 (at least 50% ipad minis and the rest split dozens of ways among dozens of manufacturers) is probably being hurt by huge phones, but I’d say it’s being hurt even more by the fact that the population of serious readers is much smaller than the entire population, and most of that population who want a one handed reading device *separate from their phone* now have one, and they don’t need a new one because the old one still works fine for what they need it to do.

    Market 3 is the confusing one. Before 2010 there was a *huge* unserved demand for two things: a simple computer made for non-nerds, and to a lesser extent, a portable internet access device. Netbooks were sort of fulfilling the second of those needs, but poorly. The ipad filled the first need extremely well, and the second one significantly better than netbooks. So it took off like a rocket. And I think the size of the unmet demand surprised even Apple, and possibly led them to rest on their money pile and pay less attention than they should have to correcting the deficiencies of the ipad between 2011 (IOS 5 enabled you to own an IPad without having to own a computer running itunes) and this year (IOS 9 will enable you to multitask).

    So, a huge unmet demand for a simple computer, which led to an extremely fast spike in sales. For a device which came with caveats in terms of its ability to fully replace a computer — it’s horrible for extended typing, it can’t talk to the universe of USB devices or SD cards, and so on. And that huge unmet demand was not for a powerful, fast computer, but for *any* computer, any device that could deliver all the wonderful benefits of a computer without all the headaches. Which leads us to the current situation. The back pressure of unmet demand has been fulfilled, and sales are flattening out to a steady state, rather like the PC market as a whole. The ongoing deficiencies of the ipad are possibly acting to prevent it from seeing faster/wider adoption than it might (with chromebooks taking up part of the demand for simple computing with fewer caveats), and the sufficiencies of older ipads to do just about everything most people need a simple computer for slowing replacements/upgrades.

    One thing that the pundits have mostly missed: With the PC market, market penetration has maxed out — new computers are only bought to replace broken/hopelessly obsolete computers. Which means sales are declining because computers are becoming more durable over time (ie, as SSDs replace hard disks, as OS system requirements stop increasing). With Ipads, sales are flat or declining slowly, but market penetration is continuing to grow. I recently gave my old Ipad 2 to my goddaughter, and her ipad 1 went to a relative, who finds that it’s just fine for her surfing, email, and facebook needs.

    (note: I haven’t read the article because my cointent account is empty and I really can’t be bothered to refill it since Techpinions can’t be bothered to do a proper job of moderating their comments and nixing the endless and tedious Apple flame wars that infest the comment threads here).

    1. I very much like your approach of segmenting the market and trying to understand what is happening in each. As I understand it, the iPad market is many times more complex than either the smartphone and PC markets. For example, you give 3 different ways to segment, but I would even segment the third into business, consumer and commercial (tablets integrated into a service).

      In Apple’s recent earnings report, Apple noted that iPad sales in Japan increased, and so I looked into whatever additional information I could find (and summarised/translated in the following link). What I discovered was that performance varied largely between business/consumer and WiFi/cellular. This clearly demonstrates the complexity of the market. For comparison, the smartphone market can be considered to be almost uniform by usage, and the PC market can be understood by simply segmenting into consumer/business.

      Therefore, understanding the market potential of each segment and also evaluating the stage which they are in is critical. Unfortunately, many segments are just starting out and it’s very difficult to predict their ultimate size. Understandably, these are the ones that pundits are having trouble evaluating.

    2. I keep being surprised that tablets are so one-size-fits all compared to PCs. I can easily see several very different segments begging for very different devices:
      – gaming: small, powerful especially GPU, joystick case, HDMI out…
      – media: large, loud sound, integrated stand
      – social: beautiful, simple
      – pro/white collar: keyboard dock, pen, management apps
      – pro/blue collar: rugged, low rez, 2 cameras, management apps

      There are things in common (battery life is never bad, as opposed to a large size… it’s more critical when you need your tablet to last a full day of work though; 3/4G also is probably more important for field work than office/home), and I’m probably missing something and some segments, but still… even Apple have 5 models of laptops + several options, to only 2 tablets ? On the Wintel side, the laptop typology is a even richer… the Android tablet ecosystem does partly mirror that.

  3. I think the SUV analogy is close, but I see it as :
    Desktop = Truck
    Laptop = SUV
    Tablet* = Crossover
    Phone = Car

    * Tablets that can decently edit text, which are hard to find now. Hoping for IOS 9 to fix this.

    I believe the tablet is better at ‘handling’ than an SUV, but not as good as a mobile phone. I also see tablets as a preferred form factor for an IOT dashboard due to :

    o More screen real estate than phones, especially with larger tablets
    o A personal device as opposed to a 2 in 1. Corp security is important, but so is home security and I don’t see one device as ideal for both.

  4. Great article. I’m typing this on my iPad Air, so the infuriating spellcheck may kick in.

    I know several people who constantly use their iPad 2’s. They talk about getting a newer tablet, but still have no compelling reason to do so.

    Says a lot about the usability and software support for these aging products. Replacement isn’t urgent when your device does everything you require from it.

    Personally, my Air is wonderful, but my eyesight isn’t, so a larger screen would be very tempting…

      1. I really think this is the bulk of it. Even as I find still more people either ditching a laptop or the laptop (as in my case) becomes essentially my desktop, with rare forays out into the wild, I still use my iPad 2.


  5. I understand the poor growth. Trying to reconcile that with how much they are embeded in the consumer markets. Tablets seem prevelent in three areas based on my observations: homes of family and friends tablets are the primary computing device; 2) airplanes – I travel frequently and walk up/down an airplane aisle shows dominance of tablets; 3) shops and restaurants – so many tablets used as checkout equipment.

    1. Don’t disagree, but the issue of the size of these markets is the question. We used to think tabs could be 500-600m a year, but that is clearly now not as likely.

  6. I think the refresh spike for iPads is coming soon. Any iPad 3 and earlier iPads have to be suffering from the 30 pin connector wearing out and the home buttons have to be getting less reliable.
    I know that my wife has been having troubles with her iPad 3 for both of those. I can’t quite bring myself to upgrade her since it’s possible that Apple might upgrade all of the iPad Air products soon. I’m not sure that she needs or will use any of the upgrade features though since she is mostly using her pad as a Pinterest / Browser device.

    1. I think you’re right about the refresh spike, but I wonder when it’ll hit. We’ve got six iPad 2s purchased in 2011, all working great, I can’t justify a new iPad purchase. The thing that would spur me to buy is a 13 inch iPad. The larger screen, plus new features in iOS 9, add a keyboard case and more on board storage, that’ll get me to buy. I’ve always used a keyboard case with my iPad 2 (as do the other 5), it really helps when you’re using an iPad for work and creating.

      I just love touching the screen to do things, my mouse/pointer feels so old and clunky in comparison. The kids (all teenagers) feel the same. But when will these things die? Maybe at some point in 2016?

    2. “Any iPad 3 and earlier iPads have to be suffering from the 30 pin
      connector wearing out and the home buttons have to be getting less

      I don’t think so. My spouse is disabled and cannot sit up in order to type. Her Ipad is her only computer, as well as her ebook reader and games machine. She uses it 18 hours a day nonstop. After two years of that kind of use, her Ipad 2 showed no signs whatsoever of any problems with the button or with the connector. And no problems with battery life either, for that matter. The only reason we upgraded to airs last year was because under IOS 7, her web-based MMO strategy games were blowing through the available memory on her Ipad, so safari was crashing on her several times a day. (I say we because my ipad is basically a spare in case hers suffers an accident)

      So no, in my experience, those old 2nd generation ipads are built like tanks and will continue working just fine within their limitations until their batteries finally go bad.

    3. I’m seeing the first tablet replacements. It’s not even about features (I’d pay attention to h.265 decoding though, thinking ahead), but about general wear & tear.

    4. I don’t disagree with this, but then we have the same issue. How big is the spike? does it just roll over time? then does it drop off the cliff again?

      Apple has rouhgly 200m iPads out there as their installed base, the issue is growing this base which does not seem to be happening. Nothing wrong with that being the size of the iPad market, however, the longer term issue is can they grow it significnatly.

      1. I am bullish on iPads. they had a super fast growth phase and that has levelled out a bit ( a kind of correction in its pace), but it will grow again. It is clear that a tablet is more suitable for most consumers and a lot of enterprise as well. Tablets aren’t going away.

  7. Ben, great analysis as usual.

    I think that tablets are particularly great in two use cases: home sofa/couch/bed consumption device, and “on the go” work/presentation device, as you described in the article. But note that a bigger, heavier iPad pro will not boost any of these use cases. I have no need for a bloated tablet while I’m reading or watching videos at home, and certainly the last thing I will need while I’m working out of office is a heavier, bigger iPad. So I’m sceptical iPad pro would be a better user experience outside of extremely niche markets and use cases (such as creative professionals).

    Also, I’m not convinced a “pro” iPad would move the needle in any significant way in terms of market situation and sales. IPad pro could become what a Mac Pro or 5K iMac are for Mac market – very niche devices that do not contribute to overall Mac unit shopments in any significant way. As much as MacBooks are drivers for Mac sales, a regular consumer oriented iPad will continue to be for iPad sales.

    That leads me to the conclusion that Apple should not be diluted with chasing a pro-iPad design, instead focusing on making a consumer experience even better. The key to it lies in software (iOS 9 and any potential future features) and services – such as Apple News and future video service that would make iPad user experience better for regular consumers.

  8. Assessing the market size of tablets largely depends on what a “tablet” is, and I think that is still evolving with the applications and features that are being developed for the form factor. It would make sense though that if the tablet is naturally just a PC that does some PC things better and other PC things worse, that the best market fit will be similar to PCs, which got their bulk volume in enterprise. This, of course, is what makes IBM’s partnership with Apple so fascinating.

  9. Although you mention that the DeviceAtlas data may be the best signal, I would caution against basing the discussion on a single data source. For example, Statcounter data does not show the same trend as DeviceAtlas. Instead depending on country, it shows either steady increase of iPad usage, or a slight decrease which may be more a result of seasonality rather then year-on-year decline. If you had used StatCounter’s data, it would have pointed to a totally different conclusion. I do not know whether DeviceAtlas is more reliable than Statcounter or not, but it is a strong concern that I have with your discussion.

    Short term trends aside though, it is very hard for me to imagine myself not working mostly on a tablet in say 10 years time. It just seems so ridiculous that the majority of the work force would be working on a desktop device that is so finicky, so susceptible to malware, and which most people expect to degrade in performance with a few years use. I think that being bearish on tablets for the mid-term, say 5 years makes moderate sense. However, being bearish for the longer term just sounds odd.

        1. Sorry, my bad: my adblocking hosts.txt file is doing its job and blocking statscounter wholesale, your link works fine from another PC.
          PS: your evernote link works fine on all PCs, thanks.

          1. I was suspecting that since StatCounter is a tracking company. I’m expecting things like that (“Hey, that link doesn’t work for me”) to increase a lot as ad blocker popularity increases. Just like spam email.

    1. You have to note the methodology of these tracking sources. Statcounter tracks every single hit to the same website by the same IP, it is not separating unique visits. So if you hit the same website 5 times in a day from the same device it counts as 5 hits. Netmarketshare does separate by uniques so those 5 hits would only count as one. This is why you see a different data set between the two. Deviceatlas is similar to Netmarketshare but has a more limited set of implementations than netmarketshare. However, netmarketshare, groups by OS not by device type.

      So it makes sense iPad OS is heavy in statcounters data because we know iPad users to be heavy consumers of the Internet.

      1. Speaking of trackers, unrelated question: if that many people are using blockers, how reliable are trackers ? I’d assume blockers aren’t homogeneous across ecosystems nor across user type either, so they skew overall results, user demographics, and ecosystem representation ?

        1. That’s a totally valid argument except that Ad blocking is probably much less prevalent on mobile devices, especially on the iOS side as of now.

          This is likely to change with iOS 9.

      2. I’m not absolutely sure that counting page views as opposed to unique visits would is the better metric, but regardless, I would just like to point out two significant issues with web tracking.

        1. Sample size
        Netmarketshare says that they only track 40,000 sites. DeviceAtlas mentions 200,000. StatCounter mentions 3,000,000. Neither is more than a minute sliver of the total Internet. Furthermore, there is no reason to believe that these samples are representative of the total. Therefore, it is reasonable to expect that each source will report different results.

        2. User agent string issues
        User agent strings on tablets are very confusing. On Android, many tablet browsers including Chrome will hide the fact that they are running on a mobile OS to prevent being redirected to a mobile site, by presenting a user agent string that is usually used on desktop browsers. I think that for the larger Android tablets, this might even be the default. iOS 8 Safari also added the ability to do the same by explicitly requesting a desktop version of the site. This could significantly reduce the tablet traffic detected through user agent strings.
        Therefore, small differences in how each analytics firm analyses the user agent string could cause a significant deviation in the traffic reported for tablets.

        I’m not necessarily suggesting that web traffic tracking is less reliable than other data sources like IDC, because I’m sure they have their own issues as well. I’m just saying that each data source has to be viewed with a healthy dose of skepticism, and in this case, I think that the data is not strong enough to conclude that overall tablet web traffic has decreased.

  10. Another thing probably hurting tablets is that they are not road warriors: small storage and at the same time usually not 3/4G, iffy battery for full-day use. I still have to lug around my netbook on holidays if I want to have my media collection and setup a makeshift media server for rainy days. Both the one-size fits all screen size and the general product features seem directed at a single normalized segment. Contrast that with laptops, phones… Tablet choice seem stunted.

  11. Ben

    Interesting analysis, and I think the point you make is spot on. There’s just not that big a consumer market for tablets. I think the bull case for tablets is the enterprise – both as replacement for current computing solution that are better solved with a tablet (kiosks, point of sale, control pads) and for new computing opportunities (clipboard replacement, etc).

    The thing is as you point out, it’s a slow growth things. Enterprises move slow. What people now are calling out as catastrophe, I think is just slowness of the enterprise.

    With this in mind, the IBM relationship and the rumor this week that Apple is working with 40 other companies is brilliant/important. Anyone that works in the enterprise knows software sucks. But, that’s not a short term problem and there’s no short term fix.

    Longer term, the iPad has the opportunity to (along with the mac) become the lion’s share of the PC industry. It’ll happen slow, until it happens fast.


    1. That could make MS’s tablet strategy workable:
      – Windows tablet that effortlessly meld into existing IT infrastructure
      – desktop fall-back mode so non-yet-mobiled apps are available
      – iOS/Android compatibility layers to tide over users until native apps
      – hope device sales wake up and universal apps follow

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