Tablet and Smartphone Futures: Specialization

As the markets for tablets and smartphones continue to mature and saturate, I believe we’re heading towards some important changes. Specifically, I think the time for mass market smartphones and tablets is rapidly nearing an end.

It’s not that we won’t have any big products, but post-iPhone 6, I think it’s going to be much harder for any vendors (including Apple) to create something that has enormous mass appeal.

The reasons for my thinking are pretty simple. As people have become more comfortable and familiar with smartphones (and tablets), they’ve started to realize the specific things they like and don’t like about certain models or certain types of devices, and they’re gravitating towards models that meet their personal needs.

Look at the debate over the iPhone 6 vs. the 6 Plus. Some people really want the bigger screen and some people really don’t. In fact, you could argue that the entire large smartphone (“phablet”) category is a great example of the specialization I’m referring to here. Depending on personal preferences and tastes, there are very strong supporters and detractors of the entire movement.[pullquote]I think the time for mass market smartphones and tablets is rapidly nearing an end.”[/pullquote]

In that light, I think the introduction of BlackBerry’s Passport phone last week actually makes a great deal of sense. The Passport is not something that an enormous number of people are going to want, but for the right market (mobile professionals who work for companies with strict security policies), it’s actually a pretty cool device. Similarly, for people who care more about looking at work documents on a phone than watching movies, the 4.5” square screen of the Passport works very nicely.

In the case of the Passport, it’s also important to remember that many people who still use BlackBerries carry two phones: a work phone and a personal phone. While that may not be an ideal situation for many people, it’s perfectly OK to many others. Again, in that light, the Passport is a great update of the work phone.

Moving forward, I expect we’re going to see a lot more specialization by other vendors to meet the needs of specific markets. As I’ve written about before, there’s a huge opportunity to create different types of smartphones for different age groups—15-year olds and 55-year olds don’t need (and probably don’t want) the same phone. I also expect to see a group of people who will steadfastly hold onto smaller size phones because of their easier portability and “pocketability” and expect some vendors to cater to those needs.

I believe the specialization trend will extend beyond phones to tablets as well. Of course there are the OS-based differences—just as there are for phones—but there’s also screen size preferences and other activity-based differences. The 9.7” iPad did a good job of introducing many people to the concept of a tablet, but honestly, is there anyone really that excited about another version of it?

That’s why I expect to see Apple introduce a larger 12” or so tablet, in addition to updated versions of their 9.7” products. A larger iPad isn’t likely to sell as well as the smaller models, but it will fill the needs of creative professionals and others who really want a larger screen size quite nicely. Similarly, that’s also why I find nVidia’s Shield gaming tablet to be an intriguing indicator of where the tablet market is headed. The Shield tablet is never going to sell anywhere close to the iPad or even generic Android tablets, but for the right audience, it’s a great product.

As appealing as the concept of more specialization may be, however, there’s a big challenge for hardware vendors: the larger the sales volume of a given device, the more you can reduce its costs and, conversely, the lower the volume, typically, the higher the cost. Smart designs will allow vendors to leverage similar components across multiple products, but it does place more difficult demands on their supply chains (and product designers).

Ultimately, technology products are likely to follow the path of other mass-produced goods, such as cars, appliances and even clothing. In all those markets (and many more), the ability to specifically target different types of consumers and then create products that match the unique needs/interests of those different consumers is what allows companies to thrive. Now, it’s time for technology companies to step up to those challenges and give us the breadth of product options that the market is hungry to see.

Published by

Bob O'Donnell

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.

39 thoughts on “Tablet and Smartphone Futures: Specialization”

  1. Bob, you focus on the physical aspects of specialization, and this is useful to contemplate. But, for me I see more specialization being accomplished through the software/app side. People can, I suspect are doing in significant ways this already.


    1. Where do you see software developers specializing their software for only some devices? This seems counter to the strong gravity of general platforms where customers are, and where customers can count on their software migrating with them to their next device.

    2. At the risk of repeating myself to the point of insufferableness: The computer wasn’t originally called “The Universal Turing Machine” out of whimsy.

  2. This is something that I’ve also been thinking about, especially as the price of tablets have dropped and they can be bundled with a service or solution. In these cases, tablets will simply be a single-use terminal and in some cases highly specialized.

    I’m less certain of general use devices becoming specialized. I’m not sure if you should be comparing to cars, clothing and appliances, none of which allow you to install software.

    At least, I don’t think Apple is particularly fond of specialization, and I think we have to admit, Apple is setting a lot of the trends here.

    It is nonetheless an interesting point, especially as Android OEMs try to carve their niches.

    1. “This is something that I’ve also been thinking about, especially as the price of tablets have dropped…~ Naofumi

      The price of non-Apple made tablets have dropped. The price of Apple made tablets have remained relatively unchanged. We should be careful not to lump all tablets together. The iPad is as similar to most low end tablets as the in-ground swimming pool is the the kiddie pool. They’re not the same at all.

      1. Of course. I hoped that you would realize what I was taking about from the context.

        It would be nice if there was a concise word for “non-Apple made tablets”.

  3. What market configuration are you contemplating? One where the smart phone market segments into a number (say 3-5) of more-or-less evenly sized specialized phones or one where there is a dominant ‘general use’ segment and then a fringe of highly specialized niche products?

    I don’t see the former happening but the latter might.

    I’ve already been on record as asserting that specialization, market segmentation, or whatever you call it, along specialized functions through a narrow specialized OS or app set just doesn’t make sense in any computing product. Maybe you might market a device by highlighting a particular function or use case but to intentionally suppress some functions in pursuit of ‘specialization’ sounds quite illogical and in fact counter historical. The history of personal computing devices is one of ever widening scope of functions that can be performed by these devices. The whole point of a computer is that as long as someone develops the appropriate software, it can do anything that you want it to do.

    So, yeah, software-based, especially OS-based specialization is out but yes cosmetic and form-factor based specialization can certainly happen. Well, it made already be happening. But this type of specialization isn’t really that significant.

    1. Cosmetic and form factor specialization is already happening on Android in some very interesting ways. Sony with waterproofing, HTC with sound, Motorola with colours and materials, yota with dual screens, even Apple with now 3 sized screen sizes to a certain degree. Project Ara has the potential to allow considerably more customization/specialization and far easier if done right. This is fantasic for the industry, I think and with a common base set of components has the potential to , once people begin to realize the options open up the industry in huge ways. Customization is just starting and will dramatically change the industry. I would even go so far as to say that Apples segment of the industry will dramatically reduce unless they adopt some of these strategies (how I am not sure) that are just staring to become more commonplace.

      1. I don’t think that is the kind of specialization being discussed. If Sony, for example, were targeting people involved in water sports, for example, that is specialization/niche. Otherwise, it is merely a feature check box. Or if HTC’s audio focus that you point out was targeting either gamers or professional audio techs or audiophiles that would be a market specialization. In either case, to really be niche or specialization we would need to be talking far more than just having relatively better sound or being safe from a child’s water cup spilling.


      2. Cosmetic and form factor specialization is happening on Android as an inevitable outgrowth of the Android race to the bottom. Android device manufacturers are desperate to differentiate their device from other Android devices so they’re trying anything and everything to stick out from the crowd in the hope that customers base their buying decisions on something other than price. But in the computing industry, the only significant dimension for product differentiation is the OS. Everything else, the competitor can easily copy or the customer sees as superficial.

        As to form factor specialization, one can say that the computing device industry has been segmenting on form factor for quite some time now: Desktops, laptops, tablets, smart phones and now wrist-worn.

        1. I would have disagree fairly strongly, in the computer industry the only differentiation was form factor and quality, Windows was and is the only os percentage wise. Android is the only mobile os that allowed any real customization. To say that that form factor/product niche is trivial is very short sighted. To say that Android is in a race to bottom is also ignoring the fact that any price point/feature set available to a competitor will be filled by somebody. Apple just doesn’t wish to play in these markets. My point was that if everybody could afford the car of their choice ( carrier subsidy’s allow this in North America) once the manufacturers catch up to allow the customizations and people become smarter consumers they will pick and choose based on their personal styles/use case scenarios Apple will become a rolls royce of phones with the attendant drop in market share. Once their market share drops below a certain level they will also become irrelevant as far as new quality apps are concerned.
          Android has caught up and in some ways surpassed Ios for breadth of apps/ease of use. The consumers are starting to realize that there are other quality alternatives around better suited to their needs. Apple is not stupid and has marketing down to a science, however project Ara if executed properly could radically change the mobile land scape, which is by definition giving the consumer customization choices at a previously undoable level.

          1. If you consider profit and research a significant factor in a market then Apple is very significant in the PC market. They may sell a small amount of PCs (Macs) but they have a lot of impact in terms of where the industry goes and how little profit is left for non-Mac PC makers. (Hint: Apple makes more profit than the rest of the World’s PC makers combined.)

            The race to the bottom for Android is also from the profit perspective. Nobody but Apple or Samsung are making any significant profits, many are losing money. Innovation requires sustained profits so lots of form factors coming from break-even manufacturers implies a desperate need to stand out, not a successful strategy (or they would be making good money).

            As for hardware form factor segmentation, as long as Android is successful I expect there to be some form factor innovations, I just don’t think most of the form factors have any lasting differentiation value, most are more one-hit wonders with new features that will become available across all devices soon (water proofing, for instance).

          2. Agree and disagree. Apple is far and away the most profitable pc company in the world but only when you includee iphone and ipad sales ( yes I know they are computers). Apples real strength is that they profit from and control the whole stack. MS makes very good money on the os side of windows while the hardware profits are split amungst multiple oems. How many truly innovative peices of software have you seen for Osx come out that didn’t come out on Windows first or these days mobile first. Dont get me wrong Osx from what i have seen is far more innovative than Win has been for quite some time but software, where the money is , not hardware happens on windows or the web first.
            Back to my points.
            – in the rest of the world Apple sells a very small percentage of the total phones because they are not subsidized
            – as manufacturers built up quality, production capability and differentiation in feature sets they will become much more desirablele to the point where apple will be a small percentage of total sales.
            -right now and these are the market dynamics that make things confusing you have
            – Apple with first mover and quality advantage taking over 50% of North Americain sales. Carrier subsidies allow this to occur.
            – in the rest of the world where there is no carrier subsidies Apple is almost irrellevant percentage wise. For that matter in China Google is almost irrellevant. The real battle is happening between the traditional Japanese/Korean manufacturers ie Samsung, Htc, Sony and LG and the chinese oems Huawei, Lenovo and assorted others. This is why profits are so scarce for these oem’s. Apple really isn’t a factor in the rest of the world. japan excluded.
            – Apple had first mover advantage with iphone and ipad, all the power to them. The rest of the world is catching up. From what I see with Ara and Head mounted displays and curved screens they may not be introducing the next paradigm shift in mobile and if somebody else gets there first they will have that advantage with Apple and the rest playing catch up.

          3. Actually Mac profits alone are more than the top five PC makers in the world.

            Mac is also growing PC marketshare very slowly, despite having a small share.

            This is likely how the phone market will go too. Apple will sell a fraction of phones, but take most of the profits and continuing to take more share slowly as incomes around the world rise.

            The biggest reasons people are willing to pay more for Apple phones are a differentiated OS and more polished hardware/software/services integration. The same reasons people choose Mac. (I am not saying Mac or iOS are better, there are lots of reasons to choose Windows and Android besides price.)

            I don’t think the switch from US carrier subsidies to a financing model is going to change customer behavior. Customers are already used to paying off phones over time. Having separate items on their phone bill for hardware and services adds some clarity, and maybe some savings, but offers the same convenience to customers that subsidies did.

            Note that iPhone sales went up suddenly in India when Apple partnered with financing. So financing is likely to happen more in other countries, not less in the US.

          4. “Agree and disagree. Apple is far and away the most profitable pc company in the world but only when you includee iphone and ipad sales ( yes I know they are computers).”

            You’ve got this wrong. The Mac business alone takes most of the PC industry profit, or close to half, something like that, it’s staggering. The iPad as a standalone business is the world’s largest PC maker, by a significant margin, beating Lenovo. And the iPhone business alone is even larger.

            You don’t need to lump the Mac, iPad, and iPhone together, you can take them each separately and they are still dominant profit-wise.

            The subsidy issue is another one you’ve got wrong. As subsidies disappear the model simply moves to financing. This is already happening. Having no subsidy is not a big deal for Apple, and Apple is not as weak outside the US as you think. Within a couple years China will be a larger market for Apple than the US. Might be sooner than that actually.

          5. You don’t seem to fully understand what “race to the bottom means”. It means **intense** price competition driven by an inability to **meaningfully differentiate** one’s product from the competitors’. Or in other terminology, it’s the disappearance of profit resulting from commoditization of the product.

            Quote: “To say that Android is in a race to bottom is also ignoring the fact that any price point/feature set available to a competitor will be filled by somebody.”

            Commentary: The fact that any price/point feature set will be filled by some Android phone maker isn’t an indication that there is no race to the bottom. It is actually one of the features of an ongoing race to the bottom. In an effort to avoid profit-sapping intense price competition, Android manufacturers are all trying to offer something that makes their device unique which would hopefully allow them to charge a price premium. So they slice and dice the market trying to find market segments that they can attack with a phone designed to be uniquely appealing to that segment.

            Quote: “Apple just doesn’t wish to play in these markets.”

            Commentary: No, Apple doesn’t **need** to play in these markets. Apple is the only manufacturer that can avoid the race to the bottom in smart phones because they are able to offer the only product feature that is perceived by smart phone buyers as desirable, unique and worth paying extra for i.e. iOS.

            Quote: “Apple will become a rolls royce of phones with the attendant drop in market share.”

            Commentary: No, Rolls Royce fell behind because they could not afford the R&D necessary to develop new technologies that would keep them competitive in the automobile business. This was fixed when BMW bought the brand. Apple, has no problem funding R&D.

            Quote: “project Ara if executed properly could radically change the mobile land scape, which is by definition giving the consumer customization choices at a previously undoable level.”

            Commentary: I suspect Project Ara will be a commercial and technological flop. For various reasons, technical complexity, economies of mass production, uninterested or insufficiently knowledgeable consumer, modularity has just never succeeded in complex, mass produced, consumer products. You name it, cars, TV sets, laptops, camcorders, etc. In fact with solid state electronics, the technological and economic forces really go the opposite way: It’s cheaper to replace the whole thing than repair or upgrade an internal component. Why would smart phones be any different? Tell me why and I’ll reconsider.

    2. I don’t think to specialize or niche requires _suppressing_ other capabilities. But it certainly would mean heightening certain capabilities. To use twfclose’s example a professional audio tech would likely be really interested in an HTC that not only offered quantitatively superior sound quality, but also have some native integration to ProTools, or maybe light pipe control with digital audio consoles, like Yamaha.

      Currently a lot of that is offered as additions or accessories to iPads and Android tablets. But if someone offered a turn key, proprietary solution, even if built on Android, that would be interesting to many audio techs I know.


  4. “15-year olds and 55-year olds don’t need (and probably don’t want) the same phone.” My early teen granddaughters and I have the same iPhone hardware but we don’t have the same phones at all. Their apps define their phones and my apps define mine. The same with their iPads (minis) and my iPad (iPad Air).

    The mass market platform is just the base with the capability to be configured in literally trillions of ways to become highly specialized. Additional specialization is provided by offering mass market platforms in different form factors. The platform is not the hardware.

  5. “I think it’s going to be much harder for any vendors (including Apple) to create something that has enormous mass appeal.” ~ Bob O’Donnell

    Bob and I disagree on this, which is fine. Disagreements make for good writing.

    I think that smartphones and tablets still have a lot of room for improvement and growth. We should not assume that the future of a product or service is limited just because our imaginations are limited.

    For example, payments are about to become a big thing on mobile devices. Perhaps enhancements in payments will spur the next wave of mobile devices. Or perhaps health. Or home. Or car. Or, well, I don’t know what else.

    I could be wrong, of course, The iPod, for example, ran its course. But it wasn’t supporting a platform. The Mac is 30 years old and its still growing. I’m willing to believe that iOS — which is less than 8 years old — will be robust enough to help power a couple more waves of iPhones and iPads before we can say that we’ve reached high tide.

    1. I’m a big fan, so hi John! I have one observation about your comments above. The iPod is far from dead. It exists in my iPhone and my iPad. It is certainly waning as a separate piece if hardware but Apple wisely obsoleted the old iPod by incorporated it into the iPhone as a feature to help sell an even more expensive product. I worked rather well, I think. What say you?

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