The tablet market share story is quite different. While the market appears to be slowing, it is, in fact, still growing. Our data shows year-on-year increases in user numbers have dropped from around +200% at the start of the decade to less than +15% in 2014. This product may be even more subject to seasonality than many other consumer tech products. Therefore, before anyone starts selling the tablet segment short, we need to wait to see what happens in the holiday season. The tablet story is still one of market shares, but with the usage of these products more like PCs than smartphones, the device represents a distinct opportunity. Here is the breakdown of platform market shares as a percentage of the current active tablet installed base.
In my tablet model, I estimate the total active installed base of tablets to be 501m devices. As I said, annual shipments of tablets are slowing but still growing – albeit slowly. Thus we must conclude the TAM for tablets is still larger than the current installed base. We just don’t know how much larger. Over the next few years I have a feeling we will get a true sense of the size of the market. That being said, there are still two distinctly different tablet markets we must be aware of as we analyze the category. I will cover that below in the AOSP bullet point.
- iOS: Unlike in smartphones, iOS is the dominant platform as a percentage of the installed base. It was common for a while to say there wasn’t a tablet market but only an iPad market. If we just look at Google’s version of Android vs. iOS then this story may still be true. iOS captures 65% of the share of tablets without AOSP. Just like the smartphone platform, the iPad owns the bulk of the most profitable customers in the tablet ecosystem. In the consumer market, tablets remain a luxury rather than a necessity. But we may see if this changes as Apple evolves the form factor, makes it more capable in terms of computing, and the app ecosystem catches on to its full potential. Apple gaining ground in the enterprise could be a likely catalyst for the iPad ecosystem as well.
- AOSP: Here AOSP means the same as it did for smartphones. The only difference is AOSP is increasing significantly as a percentage of quarterly shipments. However, these devices are not being used in the same way as iPad and even Samsung tablets. These devices are largely made up of no-name white box vendors and they sell anywhere from $40 and $80. All our research indicates these devices are simply portable video or game players and not much else. There is very little web browsing, commerce, app purchasing, or other functions that would classify it as a healthy ecosystem. Where AOSP tablets start to get interesting may be as service providers like a broadcaster, content provider, or other company who can leverage an existing business model (but not a hardware model), can use the device as a giveaway in order to capture subscription upside. For example, a broadcaster or content network in China can offer the device for $50 but tie it specifically to their content portal or services for a monthly fee. AOSP will continue to open doors for unimagined and creative business models around the tablet form factor.
- Google Android: Oddly enough, Google’s version of Android for tablets is the odd man out in my opinion. Given what we know about the tablet market, Google’s Android tablet solution remains unfocused. Their priority is smartphones and there is nothing wrong with that. However, Google risks missing out on a significant opportunity if they are not willing to take leadership in advancing the tablet platform. Nearly all sales of Google’s Android tablet solution have come from Samsung and many of those due to promotional giveaways and extremely aggressive pricing in emerging markets.One interesting trend, however, has been the rise of carrier branded tablets like the Verizon Elipsis. This tablet is now offered for free with a two year contract from Verizon and has captured a 0.4% share after slightly more than 8 months on the market. Tablet solutions like this are ones to watch as it is possible this is the angle which challenges the iPad.
- Windows: Windows is in this category thanks to the 2-1 form factor pushed by Intel and Microsoft with the Surface. To be included as a Windows tablet in ours and other analyst firm’s data the device must have a detachable screen. To date sales of these devices have been very low — making up far less than 1m shipped per quarter. While Surface 3 is a positive step forward, and the best of all 2-1’s in my opinion, I still have my doubts this form factor is the future of the PC or, more importantly, that it will ever ship more than 20% of the annual PC volume and perhaps even less as a total of the tablet market.
The story on tablets is still being written. Questions such as, “Is it a one per person device or a one or two per household (like the PC)?” still remain to be seen. Ultimately, there are many specific use cases for tablets in which they add value. We will still see experimentation along with further segmentation in the segment.