How the iPad Mini Could Impact Future PC Sales

on November 9, 2012

[dc]N[/dc]ow that the iPad Mini has been out for a while and many of us at Creative Strategies have been testing them, it is becoming clear to us that this 7.9” form factor or most 7” inch models will literally become the most important tablet for consumers in the future. There are a lot of reasons for this, but the main one is that it is light, thin, and in the iPad’s case, delivers a best in breed tablet experience. Also, these smaller tablets will always be cheaper than larger tablets because the BOM cost for a smaller version will always be less than the bigger models.

But as I have personally used the iPad mini for some time now, I have begun to see my usage patterns with tablets change significantly. Before the iPad Mini, the tablet I used the most was the original iPad. Although I also used my Kindle Fire HD often for reading and media consumption, the iPad was my real go-to device. And it became even more important to me once I added the Logitech Ultrathin keyboard to it since it now was used for content consumption as well as productivity.

However, there is an 80/20 rule with tablets that is becoming an important metric when it comes to tablets and PCs. It turns out most consumers can do about 80% of the most common tasks they do with a PC on a tablet, and any other key tasks, such as media management, large spreadsheets, music server, etc are designated to the laptop. But once I started using the iPad Mini, I found that it now became my go-to-device because of its lightweight, small size and literal duplication of everything I have on the iPad as well as the full iPad experience.

But there is an interesting twist to this. When my only tablet was my iPad, I defaulted to my laptop for heavy lifting tasks. But once I started using the iPad Mini, I found myself-defaulting to the 9.7” iPad with its keyboard as my main productivity device and found that in this case, a 90/10 rule kicked in. That means that I spent 90% of my time on these tablet solutions and only about 10% on my laptop.

Now I realize that this may not be a broad trend, but we are hearing the same type of storys in our consumer interviews. Although fresh and not fully completed research, many people who have an iPad Mini and are sharing similar stories. Almost all that we talked to told us that the role of the laptop has diminished for them significantly since they got the iPad, and were now using the iPad Mini more frequently than their larger iPads.

When I asked them if they were interested in buying a Windows 8 PC, their comments were pretty consistent. They said that if the PC were only used 10-20% of the time, they would most likely just extend the life of their PCs or laptops instead of buying new ones. And if they did buy a new PC or laptop, it would be the cheapest they could find, as they could no longer justify a more expensive and powerful version if it mostly sat at home and used for such a short time for more data or media intensive apps.

I suspect that this scenario with consumers may play out a lot more in the future, and at the very least, their tablet does handle the majority of their daily digital needs. The PC as we know it today will continue to lose its primary role in the home given its lack of use more often than not.

Even yesterday on a call with analysts Nvidia CEO Jen-Hsun Huang made a key point. He said:

consumers realize “a great tablet is better than a cheap PC.”

If this trend does play itself out as I have suggested, the impact on the traditional PC market could be dramatic within two-three years. As consumers buy lower cost and small tablets that will only get better in performance, screen clarity, and apps, it supersedes their PC use and demand for PCs and laptop will decrease significantly.

As my colleague Steve Wildstrom stated on Wed, PCs will not go away, but will soon play a different role for consumers than they have in the past. But if tablets increase their role as the dominant device for consumers to access the majority of their digital needs, than the impact on PC demand has to be impacted down the road. In fact, some key industry insiders call this the PC Cliff, suggesting that we could see a time in the not-so-distant future where demand for PCs fall by a steep amount, giving way to tablets that will take over their role as the major growth segment and primary of the PC industry.

Interestingly, there could be a silver lining for traditional PC vendors if they innovate quickly. In my comments above, I mentioned that the iPad Mini has now become my go-to tablet while the original iPad with the Logitech keyboard is now my cross over device handling consumption and productivity. And my use of my laptop has declined as a result of this. But for me, the iPad with a keyboard has become kind of a laptop replacement. It is touch based, lighter than any laptop I could ever own, and has an average 10-hour battery life and runs most of the apps I need, as well as giving me a very rich Web browsing experience.

But my iPad with keyboard is really what we call in the industry a hybrid, which has a touch based tablet tied to a detachable keyboard. Microsoft’s Surface falls into this category as does HP’s Envy X2 that they call a convertible. The nomenclature for this seems to be ever changing but we define a convertible as a tablet/keyboard combo that does not detach and a hybrid, a tablet with a detachable keyboard.

The interest in the hybrids as we define it is extremely high, although the demand for Windows RT based hybrids like the Surface is somewhat muted since it does not have backward compatibility with existing Windows apps. Instead, the hybrids we are seeing great interest in, both with consumers and business users, are Windows 8 devices that use an x86 chip and has full backwards compatibility with existing Windows software like HP’s Envy 2 Convertible. But if the scenario I suggest plays out, it will be these hybrids that drive “laptop” sales in the future, while demand for more traditional laptops will wane considerably.

I believe that the iPad mini and smaller tablets will be even more disruptive to the traditional PC market than the iPad has been to date. We can envision a time soon where a user has a 7” tablet mostly for content consumption, email and Web browsing, and a hybrid to pick up any productivity slack they may have. The bottom line is, the more consumers use tablets of either size, the more they realize that the laptop or PC in the home is overkill, and decide to either just keep the one they have longer or buy the cheapest PC they can for any extra computing needs they may have that a tablet cannot do.

I fear that a PC cliff is not far off and we are urging all PC vendors to seriously consider the ramifications of what these smaller tablets will mean to their future PC and laptop demand.