The Consumer Tablet Growth Opportunity

A great deal of my tablet market analysis has been spent exploring opportunities for a PC in the form of a tablet. Opportunities not fulfilled by a PC in the form of a desktop or laptop. As I explained here, the enterprise or commercial tablet market’s upside is still quite large. But the question about the tablet opportunity for the consumer market looms.

Tablets grew faster and were more widely adopted than any previous electronics device in history. Continued triple digit growth was simply not sustainable. The tablet market slowdown was never a question of if but always of when. As you can see by the following chart, that time is now. ((I’m keeping iPads and the overall tablet market separate due to the extremely high sales of white box, low cost Android tablets sold that are used for nothing more than portable TVs and game players.))

Screen Shot 2014-10-23 at 8.23.07 PM

The tablet market, like all markets before it, is normalizing. Growth rates have slowed and now we can wrestle with the question of how much more growth is to be had.

Replacement Market vs. First Time Buyers

I find it helpful to focus on the question of whether the tablet market for consumers is a replacement market or if there is still a market for first time buyers. If the tablet is only a replacement, then it has peaked. However, I don’t believe that has happened. Apple keeps informing us 50% of iPad sales are to first time buyers. Which gives us an indication there are still new owners to be had. So how may that growth in first time buyers be had? I see two possibilities.

The first could be price. My friend Stephen Baker at NPD gave us some insights and holiday outlook for the tablet market. As Stephen points out for the US market, price could be a driver. I think it should be safe to assume that price war offerings for iPads and other tablets will be fierce in Western markets this holiday. Retailers use this pricing to get customers in stores where they hope they buy a plethora of other items. I’m guessing retailers will hope to leverage Apple’s new lineup with this strategy in mind. I believe Apple has a strong lineup from the original iPad mini to the newest iPad Air 2 covering many price points and giving retailers pricing flexibility with their offerings. In general, other branded tablet vendors have been seeing decreasing sales and Samsung in particular. It’s reasonable to assume Samsung tablets will see steep discounts this holiday at retail.

The second growth area is replacements and additions. It is very hard to predict when consumers will replace their tablets and more specifically their iPads. ((I point out the iPad specifically because it is the tablet brand that has the largest installed base by a healthy margin.)) As often is the case with Apple products, iPads are often handed down to other members of the family or to friends. In this scenario, the new iPad replaces the current owner’s device but another person gets their first iPad. Ultimately this is good because it builds the iPad owner base, who we would assume will be added to the future replacement opportunity. Continuing to build a large installed base will yield rewards. Whether the new lineup drives this upgrade and hand-me-down cycle we literally have no idea. But should it hit this quarter, it could be huge. While the iPad 2 is still a perfectly fine device, it has the highest installed base of all iPads. My firm’s estimates for active iPad 2s in use is over 60 million. We believe this base will upgrade at some point in time — we just don’t know when. It could be this quarter or it may not. But, given the price aggressiveness we assume we will see this holiday season, I’m guessing many iPad 2 owners may be enticed. Realistically, there is no better quarter to find deals than a holiday quarter. So this large installed base of iPad 2 owners would be smart to upgrade this quarter or risk waiting another full year. Given the channels I track, I should have a decent sense of what is happening before the quarter ends.

Stealing PC Owners: I still believe the traditional notebook and desktop form factor is overkill for most mainstream consumers. The decent sales numbers of PCs we are seeing are largely coming from enterprise and commercial markets such as education/students. The consumer market has yet to move in mass to upgrade their PCs. We believe at some point in time those consumers will make the move. And the wonderful unpredictability of many consumers leaves us guessing at what they will buy and when. Will they buy another PC? Or will they move to a tablet? This is the tension we will have to live with until we see a market indication of what is happening. The tablet will still have the price advantage this quarter and I suspect Windows 8 is still a hinderance. I do expect Macs to have a very strong holiday as well and, with the new iPhones in the mix, there is a lot competing for consumers’ wallets this holiday.

These are a few of the scenarios I think about when I look at the upside for consumer tablets. This quarter seems very hard to predict right now for nearly everything but for the  smartphone market. For the first time in a long time it’s hard to say with any accuracy how the consumer market for PCs and tablets is going to play out.

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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

921 thoughts on “The Consumer Tablet Growth Opportunity”

  1. I think the biggest challenge to the Tablets segment on the market is Chromebook
    Because whether at school, at work or at home someone with a big phone will be better off investing his money in a Chromebook than in a tablet.

    1. I share your optimism for Chromebooks in specific verticals. Education being a large one. I believe the Chromebook will become the standard in education deployments for stationary computers. But reading much of what I’ve written you have to keep in mind how the form factor simply limits what it can do. This is why I use the phrase a PC shaped like a tablet and a PC shaped like a notebook. You can’t walk around or go outside with a chromebook. Therefore it is limited, like a notebook its mobility.

      The other thing that really has me thinking is the computer literacy concept I have been lightly mentioning. What makes the tablet interesting to me is how it has no learning curve like the PC does, and in the cases of computer illiterate people not just Windows is a barrier but so is the mouse and keyboard. This is why parents use iPads with kids to help them learn and play in new ways, or why the elderly flock to them. The common theme in consumer markets is the ease of use combined with PC like capabilities of the tablet. I’m still very bullish on tablets across the board, but I take the long view on tablets to begin with.

      1. Portability-wise, I think about artists I know that carry around those large sketch books and sit with them propped up or on a table, etc, I see no problem with a very large iPad, even a 15 inch screen. Could be that’s way too niche and Apple will never make one, but I would love it.

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      2. i get your point but a lot of use case you associate to tablet such as reading, clipboard and even media consumptio can easily be done if not better so on a Phablet form factor therefore this not just Chromebook but a combinaison of both Chromebook + Phablet that could limit the ability of the Tablet market to grow

      3. In my son’s middle school, the students have options between Chrome books, iPads, ITouch, Airs and iMac. The last thing used, with plenty on the carts is the Chrome Book. The Admininstration like them, however the students for the most choose them as a last resort.

        1. Thanks for telling us.

          Looking at all the reports of large Chromebook purchases in schools, which invariably cited benefits from the administrative side, I had suspected that Chromebooks were a “orifice” favorite but not an end-user one.

          Your experience confirms this.

          1. his experience confirm nothing beyond simply that most children are more attracted to an IPad than a Chromebook simply because of marketing.

          2. You sound like an engineer friend of mine who worked at Japanese electronics firms, and was very sore about how they completely lost out to Apple.

          3. it’s not about loosing Apple is about you underestimate the value of Chromebook maybe simply based on the fact that you are not sold on the idea compare to Apple approach

            review say a lot about a product
            when people take their time to write a review about a product very often is because they are either very unsatisfied or extremely in love with the product. having said that if you go to Amazon you’ll notice that Chromebook have been in top among the most popular and most review than Mac and other PC despite the fact that Google never promoted it as much as Apple does Mac and IPad

          4. Amazon rankings do not correlate with other estimates of Chromebook sales.

            Market research firms are telling us that Chromebooks are still only about 1% of total PC shipments. Web usage statistics suggest that Chromebook usage is tiny. Samsung even announced that it is exiting the European Chromebook market.

            At this point, Chromebooks are still very, very small.

            http://www.theguardian.com/technology/2014/oct/22/chromebook-sales-pc-acer-hp-samsung

            With this data, my personal impressions of Chromebooks do not matter. I have never used one, and I cannot have my own personal opinion. I’m only looking at evidence from multiple sources and reports from people who actually use them.

          5. the way you look at the market is extremely Flaw

            PC install base mean nothing in this scenario

            Chromebook is a new form of computing that saw 66% growth for the first two quarter of this year hence the best way to compare it to PC should be with the growth during the same time frame not install base

            even the mighty IPad install base is tiny compare to PC

            when talking about Chromebook you need to focus on it’s potential not it’s current statue as new entrant despite it’s success

            Besides
            Amazon ranking doesn’t including commercial channel sales which is mostly two third of Chromebook sells

          6. even the mighty IPad install base is tiny compare to PC

            No. Multiple statistics prove this. Although smaller than PCs, much much more than Chromebooks.

            Chromebook you need to focus on it’s potential

            Agree. But if you focus too much on unproven potential, then you’re simply guessing.

            Amazon ranking doesn’t including commercial channel sales which is mostly two third of Chromebook sells

            Unless you can back up Amazon rankings with another independent data point, it’s hard to seriously consider it as any kind of evidence.

          7. 1- First of all, not all PC are equal,

            you cannot compare Chromebook to desktop, Mac, and server which are lump in to the PC overall number. you need to compare it only to notebook.

            speaking of install base

            Apple Notebook category are only 5% of the entire PC market, do you consider that to be a failure.

            the Amazon rankings can easily be back up to the growth of the Chromebook market over the last two years.

            however School and Business do not buy their Chromebook on Amazon, they buy it straight from the manufacture therefore with a close network i am not sure that they’re are include on these statistics that you refereed to.

            the IPhone has a very tiny share of the entire smartphone market too in 2008, what Happened then?

          8. i am not sure that they’re are include on these statistics that you refereed to.

            They are included.

            I didn’t say the Chromebook is a failure. What I said is that it satisfies the needs of “orifices” quite well. That seems to be why administrators like them. It is successful in the education niche.

            The problem is, that niche is not very large, at least not yet. It’s also not a profitable niche.

            I didn’t say Chromebooks are failures. However, it seems that Samsung has given up in Europe. That sounds bad.

          9. Chromebook is not a niche product, it is a mass-market product built on Cloud technology Where computing technology is heading.

            For someone who is really interested about disruption theory, you seem to be unwilling to recognize technology that could be very disrupting except when it’s come from from Apple,

            Besides
            i will advise you to use a Chromebook to understand the point i am making.

          10. If you take even a casual look at the data, it points to Chromebooks only succeeding in the US education niche. That is a fact.

            I agree that there is a possibility that it could be disruptive, but disruption depends on how the incumbents will respond. In this case that is Microsoft. Microsoft has shown a willingness to respond strongly and match Chromebooks on price. This means that Chromebooks will have more difficulty disrupting Microsoft.

        2. I concur – the word from our kids about the Chromebooks deployed in our district (among the largest public school system in the state) is that the kids don’t like to use them.

          Yes even a child can recognize the difference between a project designed to delight versus one engineered for thrift.

        3. I concur – my kids say that the Chromebooks in their schools are not well liked either (part of one of the largest public school systems in this state).

          Yes even children can discern between a product designed to delight versus one engineered for thrift.

        4. there is one word that describe what you just said

          MARKETING

          i’m surprise that you could not even make sense of this simple observation

          1. Regardless of the reason (I would say it is more about ease of use than marketing, but either way) if they don’t actually _use_ the Chromebooks, it doesn’t matter how arguably superior it may or may not be.

            Joe

          2. Maybe for you. But apparently those kids disagree. Anecdotally, I haven’t seen any viral videos of infants using a Chromebook without ever using one before.

            Joe

          3. Review’s and consumer satisfaction of a product says a lot more than some Kid who never use it.

            Children choosing IPad over a Chromebook make sense due to the fact that the IPad is more suit for consumption than a Chromebook

            Chromebook is a new form of computer that is just stating to take off hence you need to compare it not with and IPad, a different category but other form of computer such as PC and Mac

          4. Really? I think children actively avoiding a Chromebook speaks volumes. in education, iPad is exactly what you should compare it to, it doesn’t matter a whit about form factor category. It matters what they are going to use.

            Joe

          5. children actively avoiding a Chromebook, you’re joking right

            do you have some Data on this?

            who do you think are using all these Chromebook that has been sold at school that provide all the momentum that we are talking about which force many school to cancel the IPad project.

            Chromebook are better for productivity and the IPad for consumption

            the comparison work depend only on the scenarios

          6. We are talking in education. I am responding to the people here who are telling us the kids in school avoid the Chromebooks. What people on Amazon think of the Chromebooks apparently have no affect on them. If this is indicative of the larger view of kids this is a problem for Chromebooks. My only data points are what people are saying in this discussion. Never claimed otherwise.

            Joe

          7. the majority of Kids these days will most prefer to have Facebook and their video game at school instead a computer to do school work don’t you think so?

          8. Probably. But there isn’t anything intrinsic to a Chromebook to prevent that over an iPad.

            Joe

          9. my initial point what a Chromebook + Phablet are better suited for Productivity + consumption compared to an IPad + regular smartphone

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    2. Chromebooks are a much bigger threat to low-end laptops than tablets. Compared to both tablets are much more portable, have longer battery lives, are better for media consumption, gaming and many of other tasks. You will never be able to get a small child or computer illiterate person to use a Chromebook. Chromebooks are clearly better for typing and potentially web browsing and other tasks that are better with a keyboard and mouse, but that puts it in competition with laptops not tablets. The tablets biggest threat by far is the smart phones, primarily phablets.

    3. The problem I’ve seen with Chromebooks is that people I know who buy them find out what they really are, then either take it back or begrudgingly try to use the thing for a few months, then guy buy the iPad or Galaxy Tab that they should’ve gotten in the first place.

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  2. Tablets will ultimately win – just drag the timeline along till “digital natives” reach equilibrium with “digital touch natives” – like 15 years from now.

    A tablet can be many things, also many more things than a gaming console or a stationary pc / laptop.

    I think going forward it’s worth to separate a tablet into its two core components – a screen and the computing part.

    The computing part will soon enough reach a point where there will be relatively little complaints regarding performance for any task at hand, excluding specific content creation scenarios (3D DCCs…). Also a tablet will not be your render farm, but usually your pro desktop isn’t either.
    Assuming an overwhelming amount of use cases centres around web content, image/video editing/viewing, spreadsheets, word processors, reading and gaming there will be little to be left desired for in terms of performance.

    The other component – the screen – is merely the window to the computing power and the user interface.
    The sole reason to get a tablet in addition to a smartphone is the screen size, but this is very obvious.

    The narrative of “you can’t work on a tablet, even less so on a phone” looses all credibility once a tablet or smartphone blends into the background of your computing tasks by working untethered and lag free with your mostly stationary larger screen and kb/mouse input (or leap motion controller or whatever the future will throw onto us).

    It’s not hard to imagine a future scenario in which a mobile device, as large as a tablet or as small as a watch, will act as the laptop + docking station – sans the connectors and cables. There are major hurdles to overcome first, but these devices jump higher with increasing frequency.

    The iPad may not sweep the computing market clean in the next 12 quarters, maybe never – but mobile computing devices can get considered to be in the best position to ultimately shatter the paradigm of “fixed form” computing. At some point I assume Apple will take a lot of typical heat when they’ll present very “transformable” devices that blur the idea of “this is a notebook, this a pc and this is a tablet…” in their way as an imitation of devices that failed three years ago (Asus Transformer and similar). Continuity already hints toward such a possible future in a very rudimentary form.

    In such a future the iPad & other tables can easily fail (as it’s just a bigger screen) and go iPod. The company with the best interconnected devices and eco system will however reap outsized rewards by redesigning the future without fear of destroying parts of themselves.

    This can be Apple and they radiate the strongest vibe of moving this way, but it could be MS as well as Google. It’s open game once you remove the idea of past fails mean future fails – or success. Apple and Google might be positioned best today, but 15 years ago they weren’t very likely to be in the position they are in today.

    The Chromebook – in the sort run between today and the next few years – looks good. Longer term it might also be a transitioning device to a more untethered future.

    Enjoy the weekend!

    1. Thanks for a thoughtful and informative post.

      There SHOULD be more tablets than PC’s. The PC is overkill for the consumer market. I also appreciate that you maintain the distinction between device classes.

      Where I do disagree, if you can even call it that.

      “Also a tablet will not be your render farm, but usually your pro desktop isn’t either.”

      That isn’t the only reason for a PC, though the PC will always outperform a tablet.
      Other reasons to use a PC over a tablet include the ability to add and upgrade features (Apple has moved away from that), get the best component in each class, and run anything you want. Among others…

      I agree that a tablet will become ‘fast enough’ for more and more functions. PC’s will become faster still. Unless curation is removed from tablets, the PC will always be more ‘personal’. Want to compute the millionth and tenth digit of pi, using Java, the PC is your device. Why would one want to do that? Well, that’s ‘personal’. 🙂

      1. We’re talking consumer devices here. Other than a new mouse, how many consumers upgrade their PC? More so they upgrade X few years, where X is whatever their needs and budget dictates.

        As for computing the millionth and tenth digit of pi, that sounds like a personal problem. 🙂

      2. Thank you very muh. I don’t think mobile devices need stationary devices to fail in order to succeed. There are use cases for the pc which will remain use cases for the pc for various reasons. Those who want and need a stationary computer will always be able to get one. It’s like buying a car with a big trunk – some need it every day, others just feel better having it. It’s all good either way.

    2. “It’s not hard to imagine a future scenario in which a mobile device, as
      large as a tablet or as small as a watch, will act as the laptop +
      docking station – sans the connectors and cables. There are major
      hurdles to overcome first, but these devices jump higher with increasing
      frequency.”

      As you say, there are many major hurdles to overcome, some of which are not going to go away even with the help of Moore’s law. Apple’s approach to overcoming the hurdles seems to be to leverage the cloud, so that your data is always instantly available for you no matter what screen you sit down in front of.

      1. At one time, I had thought that the iPhone was going to evolve into a universal CPU/cloud access/storage (your whole life in your pocket) that works as a smart phone by itself but can then be docked into a dumb laptop or desktop as needed for large screen computing. I suppose it didn’t make economic and commercial sense because instead of paying all that money for a brainless laptop or desktop, why not pay a little more for the brain and have two computers that can be used simultaneously, rather than have two but usable only one at a time?

        1. I agree that Apple still has a long way to go before they are completely competent at doing cloud services. Right now, I find that I can’t use the 200 GB of iCloud space that I bought because Apple provides no way to copy large amounts of data to iCloud Drive. I tried copying a 60 GB documents folder and I can see in the console log that Apple is throttling uploads to nearly nothing. I have no idea why they would do this but it prevents iCloud from being a DropBox replacement.

          Having said that, Apple is not going to get worse than they already are. Over time their expertise will grow. I don’t know if they will ever catch up to Google and Microsoft but we are talking about the long term future. That gives Apple plenty of time to figure things out. Apple is better in 2014 than they were in 2010 and it likely that they will continue to improve.

          1. that will require a change of internal culture,
            being a product company doesn’t translate easily to being a cloud service.

            the best thing for them will be to buy a company like Box or DropBox and run it separately

    3. Spot on. I would add voice to touch as the defining features of the new tablets. And not just voice as in voice calls. Voice integrated into touch. So we touch an object on screen and say “open in Pages.” We use Siri to generate contacts, not just find them. We use Siri during a call to reference information relevant to the conversation.

      A large iPhone, rather than a large iPad, will win. But yes, a tablet sized gizmo.

      More … the branding will move from iNouns to iVerbs: iWork will be an enterprise tablet; iPlay will be our entertainment center.

      1. I think “voice” could be interesting in a sense where it passively listens and provides contextual content. The whole talking to my phone for info thing hasn’t caught on with me. This unless it’s in the car.

  3. Okay, this is just thinking from left field, maybe out of the park, but once Apple’s products reach a point of cloud-based integration such that the devices appear to us as seamlessly interchangeable access points to that big computer in the cloud, wouldn’t a specially priced bundle of Mac/iPad/iPhone start to make sense? If the price is right, I would go for that in a heartbeat.

    And again, only Apple can do this.

    1. A lot of what you say describes the evolution of the mainframe. Both good and bad.
      Now a ‘personal mainframe’, I can go for that.

      1. I’ve long thought Apple could do some kind of ‘personal cloud’ solution, in your home. What is Time Capsule but a step in that direction? I think we’re a ways off, but I see how it could be done and how it would fit very nicely into HomeKit, HealthKit, Apple TV, iOS devices.

        1. I’d like to understand the difference between a shared space on a secured and managed server and a “personal cloud”. I’ve since long switched off my NASes and moved my files encrypted to the cloud. Otherwise you suggestion reads like a NAS.

          1. It’s a very abstract concept inside my head. I don’t know the technical details at all, that’s the kind of boring stuff I pay Apple to take care of. I would assume that a local cloud solution, some kind of device in my house, could be much, much faster and therefore more capable than any secure server. And wouldn’t that have to be more secure and private by its nature than anything actually in the cloud? But of course there’s the issue of offsite backups, but maybe that’s what the actual cloud is for, the backup. Sorry I can’t explain this any better, it’s sitting there on the edge of my vision.

    2. Sure, it does. We have already seen phone/tablet bundles, but I would argue they need to go the other way with pricing, Subscription. Phones are by far the biggest category largely because most of the price is on your monthly cell phone bill. Consumers are much more willing to pay a small amount per month than make one large purchase. By extending and marketing financing options and releasing subscription services, where you always have the newest device, Apple could get existing customers to upgrade more frequently.

  4. I really think the endgame will be some kind of hybrid product.
    In the medium term, tablets can probably serve 95% of consumers, performance-wise. and there’s no reason all relevant apps can’t make it (they’re not all there right now, and a single missing key app forces you to still have a PC).
    But, the very mobility of tablets makes them woefully unsuited to extended sessions, where at least 1 large screen -preferably several-, a keyboard, a mouse, lotsa storage,… really make a difference in comfort and productivity.
    I’m also utterly unconvinced by a cloud-only paradigm. “The Cloud: because you don’t care if your apps and data are up in the air”. Cloud is nice for synching and anywhere access, but it offers patchy availability (not everyone lives in a well-served urban area, nor remains static), bad performance, so-so security, and no guarantee whatsoever.
    One extra issue is pricing. High-end tablets are a lot more expensive than more powerful and versatile ultrabooks (and heavier+bulkier too, once you add the keyboard-case). Most prosumer users around me are sticking with laptops for that reason. And screen size.

    1. If you really want to talk about the endgame – you won’t have more than the computing power to drive an user interface, networking and output. Everything else will be stripped away.

      1. That’s seems a fanciful assertion to make. Are you assuming we’ll get 100% geographical wireless data coverage, 100% of the time, and with satisfactory levels of confidential and data safety, all that for a lower cost than ever cheaper local CPU+storage ?

        1. I wouldn’t go so far and claim automobiles will replace horse carts – can you imagine someone would ever build a network of roads and gas stations? Certainly not.

          1. Actually, I’ve been thinking more about your comparison, it’s even more wrong than that:
            – cars are faster and more autonomous than horse carts, the same way a standalone PC is faster and more autonomous than a cloud-based one. So really, you’ve got your comparison upside-down.
            – anyway, both are based on the same, independent-device principle as standalone PC. To stay in the transportation world, standalone PCs are vars (independent), cloud terminals are trains (infrastructure-bound). You’re in practice advocating getting rid of cars and going 100% full train. Shure.

  5. The labels on the x axis of your chart are wrong. The last 6 labels are
    Q3 13, Q4 12, Q1 14, Q2 14, Q3 14, Q4 13. I assume they should be
    Q3 13, Q4 13, Q1 14, Q2 14, Q3 14, Q4 14.

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