Tablets represent one of the greatest opportunities to expand and enhance computing. However, it is a very mis-understood product. I want to share some statistics about tablets and then add some key points on the market as it stands today as well as a projected outlook for Q4 and beyond.
- 85% of tablets sales have been to existing PC owners
- Sub $100 make up 20% of quarterly tablet sales
- 55% of those who spend less than $200 had buyers remorse
- 52% of those who spent less than $200 intend to spend more on their next tablet purchase
- More tablets will be sold in the US in 2013 than any other region
What this data tells us is that consumers are latching onto the idea of a portable larger screen device. Currently, there is a heavier mix of lower-cost small screen tablets being purchased primarily as media devices. But it seems that early market data suggests that while these low-cost media centric tablets are being used primarily for media today, consumers appear to be graduating to tablets that are more capable than just consuming media. In fact, consumers in many emerging markets primarily appear to want to use this tablet form factor more like PCs than smartphones.
The Current Landscape
The real point of clarity needed for the tablet market as it currently exists is the two distinct tablet markets emerging. On one hand we have tablets in which a degree of computing is possible. That is tablets that can be used and to a degree replace PCs. The large iPad, Surface, and many 2in1 devices coming from PC OEMs running Windows 8.1. At the moment we are looking at breaking these out by screen size. 9.7-13″ tablets would be considered computing tablets. 8″ and below would be considered media tablets. But right now any and all slate devices are being counted as tablets. So while this works for now as a category, it will need to become more granular in order to gain the right perspective about what is happening in the market for tablets.
While the 9.7″ and above more computing centric tablets are cleaner to understand and track the sub 8″ devices are where all the growth is and have a much more blurry picture. Branded OEM tablets from Samsung, Amazon, LG, Apple, etc., in the sub 8″ screen size form factor are clear but it is the ‘other’ category that muddies the waters. In all conversations with service providers from areas like China and India we do not see much evidence of the existence of these tablets showing up on anyones networks. We here more often then not they are simply being used as portable TV players to side load movies on to watch. We have heard of upticks on Flash media in certain regions so this theory could be plausible. Another explanation is evidence pointing to smartphone chips like a Cortex A5 being used in many of these low-cost white box tablets. Which would mean they would run a smartphone OS and perhaps show up on service providers networks as smartphones. Lastly, it is possible that the numbers of white-box tablets are simply inflated and not accurate. There are a number of new SoC vendors popping up giving out numbers to the tracking firms and these new companies could be inflating their own numbers simply to get attention. Those are a number of the theories I have but it is extremely difficult to confirm any of them.
What is interesting as well is what is happening in the US in two areas.
Subsidized Tablets: Carriers are beginning to offer tablets at a subsidized rate with the purchase of a new smartphone and tablet data plan. As well as the tablet alone subsidized with the purchase of a data plan. We have heard from a number of sources that Samsung’s 7″ tablets have been doing well on certain carriers offering this discount. AT&T is also offering a free Samsung small screen tablet with the purchase of a Galaxy Note 3 or Galaxy S4. These promotions will clearly drive sales of tablets even higher for this calendar year.
New brands and unbranded: Nabi Tablets are a brand to watch in the US. They are sold in US retail and are specifically targeting kids at different age ranges. Most of these run on Android. The appeal is parental controls for the devices. They even have a tablet with a keyboard accessory that looks to compete more in the 2in1 category products like the Microsoft Surface. From retail sources I have spoken with, there is evidence to suggest these Nabi tablets could sell in the millions this Q4 in the US.
Outlook for Q4 and Beyond
We are projecting tablet sales WW in the 72m range for Q4. Interestingly we are also projecting PC sales to be below 80m for the first time since 2008. The sales of PCs and tablets are likely to be very close in volume this Q4. We remain convinced that WW sales of tablets will overtake WW sales of PCs sometime in 2014.
The CEA research department highlighted that tablets made up 29% of the Black Friday weekend and cyber Monday sales. They also reported continued increases in tablet purchasing intent. Their Chief Economist Shawn Dubravac pointed out that there were over 300 tablet specific promotions in US retail over the holiday shopping weekend.
Tablet sales in 72m range would be a 38.4% increase over last years Q4 of 52.2m. We are projecting total tablet sales in the 215-220m range for CY’13. Which would represent a 76% increase from 2012.
We expect the US and Asia to be the largest consumer markets for tablets going forward. Currently the US has the highest tablet ownership at 45% which could be as high as 55% by the end of 2013. Below are the forecasts I’ve assembled from other sources, as well as our own internal estimates.
It’s interesting how Amazon seems to only be capable of selling Kindle Fires during the holidays.