Last month, DisplaySearch published an analysis, entitled, “Smaller Tablet PCs to Take Over in 2013?” The report essentially laid out the volume decrease of 9.7-10” displays and the increase of 7.X” displays in January of 2013. While this isn’t the freshest of data, it’s still valid and certainly makes sense, given the popularity of the iPad mini, Kindle Fe HD, Nexus 7 and the long tail of “white tablets.” If we are indeed in a volume shift from larger displays to smaller display tablets, there are two key implications which I think are very important as they impact the entire tech ecosystem.
Let me start by taking a brief look back at tablets a mere 9 months ago as it’s important to know where we came from to appreciate where we are going.
Until the Nexus 7 tablet was launched, Android tablets were literally dead in the water and the “tablet market” was really the “iPad market”. This makes sense even today as 10” Android tablets lack the app ecosystem that Apple provides. Why would a consumer pay $399-499 for a tablet that has maybe 5,000 optimized tablet apps? They didn’t and still won’t. Google attempted to compensate by “stretching” phone apps to 10” displays, but the experience is still lacking. Stretched phone apps still look and operate horribly on a 10” tablet. 7” Android tablets like the Nexus 7 were different in that they can effectively leverage Android’s large phone app ecosystem. The rest is history as volumes rise for 7″ tablets.
Let me dive into the implications.
The first implication of 7” tablet popularity is the creation of a new ecosystem. Let me focus on hardware. The iPad hardware ecosystem is large, but not diversified, particularly in hardware, as it is essentially Apple, Foxconn, and Apple’s chosen IHVs. On the OEM side, I believe companies with subsidized business models will be the most likely OEM winners in 7” tablets. These are companies like Amazon, Google, and Microsoft. They can accept lower hardware margins as they drive their corporate profits from e-tailing, advertising, operating systems and application software. Other winners will be OEMs with strong consumer brands or huge marketing budgets like Apple and Samsung. Less clear are the 7” opportunities for PC giants HP, Dell, Asus, Lenovo and Acer. With a new crop of OEMs come new ODMs like Quanta, Pegatron, and the long tail of “white tablet” manufacturers. With new OEMs and ODMs come the component manufacturers.
To get the full appreciation of just how many different component suppliers are involved, you just need to go over to iFixit’s iPad 4 teardown and see the myriad of companies involved. The challenge before was that if you weren’t in the 9.7″ iPad, you were out of luck, because Apple rarely second sources components and they owned the tablet market. On the SOC side, now Nvidia, Qualcomm, Intel, Mediatek, Hi-Silicon (Huawei), and even relative unknowns like Rockchip (in the HP Slate 7) will have opportunities. Needless to say, all this new competition will lead to lower prices and hopefully more innovation. I say “hopefully” because with the lower prices, it’s not a foregone conclusion there’s money left over to invest in a lot of innovation.
The final implication of the increased popularity of 7” tablets has nothing to do with tablets at all, but with personal computers.
10” tablets, more than 7” tablets, had the ability to augment or replace certain PC usage models. Like many, I used the iPad for years as my primary (% time spent) productivity device when paired with a ZAGG/Logitech Bluetooth keyboard. My personal iPad usage model was probably ahead of the curve, but a 9.7” iPad worked well for email, calendar, research via the web or news apps, reviewing presentations and documents, and even writing reports and research. I would never never finalize a document on the iPad as I would do this on a notebook, but the initial research and text entry worked well.
Usage models are different on a 7” tablet versus a 10″ tablet. 7″ tablets are more appropriate as content consumption devices, driven primarily by the screen size and input methods. If you have ever had to type out a lengthy email on a 7” tablet, you know what I mean. Typing on a tablet entails some very uncomfortable typing where half the display is covered by the on-screen keyboard. 7” tablets are great, however, for reading and deleting emails, watching videos, reading e-books, and browsing simple web sites.
With all of this considered, I believe this means that those with the 7” tablets have a greater need for a modern notebook more than those with a 10” tablet. This is not to say that I expect the market for MacBooks and PC notebooks to explode immediately with amazing growth, but I do believe it will lead to increased notebook sales. When you consider the aging installed base of low battery life, thick and chunky Windows XP and Vista-based notebooks, my thesis gets stronger.
Net-net, the popularity of 7” tablets make notebooks look more attractive and I believe will give a boost to MacBooks and Windows notebooks.
Until the Nexus 7 and Kindle Fire HD arrived, the “tablet” market was really the “iPad” market. While not providing the best experience, 7″ Android tablets provide a good enough consumer experience at a very low entry price. The iPad mini launch validated the 7-8″” tablet market and, based on DisplaySearch figures, the mass of volume appears to be headed to the 7” form factor. This shift brings with it two key implications.
Android will becomes a player in the tablet market and with it, brings much more competition across OEMs, ODMs and even component suppliers. This increased competition will drive lower prices and hopefully more innovation. There is a case to be made that only those with subsidized business models or a stellar brand will survive, but we will have to wait and see on that. Finally, I think notebooks will get a boost from the popularity of 7” tablets driven by the usage model differentiation between the two devices, which is absolutely the most ironic implication.
Who thought a display size change was boring?