Why Has the Growth in Tablets Stalled?

When Apple released their Q1 earnings in late April, they reported sales of iPads were down substantially over last year’s same quarter. Apple CEO Tim Cook stated part of the reason for a decline in iPad demand this year is, in Q1 of 2013, there was pent-up demand for the iPad mini and a backlog from the holiday quarter that got filled during this period. He went on to say while they did not sell as many as the financial analysts had projected during the last quarter, Apple was happy with their unit sales that met their own internal predictions.

But something is going on in the market for tablets that suggests our love affair with them may have cooled down — or at least the market for tablets has started to mature. Of course, Apple faced serious competition in 2013 from competitors like Google, Samsung, Amazon and many others who followed in Apple’s footsteps and created very competitive products in the seven and ten inch range of tablets. In many cases, these were cheaper than Apple’s iPad line. The competition in tablets contributed to the overall market for tablets growing but it also impacted demand for iPads.

There seems to be three key dynamics now shaping the future of tablets. The first is in mature markets, where tablets have now been shipping since 2010, the consumer audience has figured out what a tablet can do and the need to refresh them yearly or even semiannually no longer drives their thinking. Indeed, we are already seeing people with 2 and 3 year old iPads or similar products that are very happy with what they have and it would take a dramatic new design or new features to get them to buy new models.

Another thing we are seeing is most folks have figured out tablets are highly shareable devices. This is especially true in families. Although there are a some families where each person has a tablet of their own, many homes have one or two that are shared among the family. They too seem to be holding on to them and not in a great hurry to upgrade. But there is one other dynamic coming up in our research that is interesting. While tablets at first were exciting to many, it turns out their smartphones really sit at the center of their digital universe. As screens on smartphones have been getting larger, they find they can do pretty much what they need or want to do on a tablet on their smartphones. Now screens that are five inches to six inches meet a lot of their tablet needs.

This doesn’t necessarily mean they won’t buy a tablet too but they seem to be scaling back on how much they are willing to pay for a new tablet. Or, instead of upgrading to multiple tablets for the home, they just buy one top notch brand and share it. It also seems the tablet market has matured in developed markets faster than many expected and are starting to develop more traditional refresh cycles. While PCs are now refreshed every four to five years, it is not clear what the refresh cycle is for tablets. Our research suggests it is every two years but we are also seeing many keeping current tablets longer than that before upgrading.

While consumer demand for tablets has seemed to stabilize or flatten out in developed markets, the second dynamic and a bright spot is businesses and enterprises have finally figured out how tablets can fit into their IT program and we are seeing a real upswing for tablets in these markets. What is interesting is in this market, while somewhat price conscience, IT managers do not buy cheap tablets. In fact, their pricing sweet spot for tablets hovers around $600-$800. They also tend to buy the larger 9-10” tablets and are using them for all types of business applications. This is very good for Apple since today they own the tablet market and ultimately pricier tablets help their overall bottom line. And the recent news Apple and IBM will partner to bring iOS devices to the enterprise can only help Apple gain broader acceptance, especially with the iPad in IT. However, the IT market for tablets will become more competitive as Microsoft and Samsung bulk up their business class tablets. They have no interest in letting Apple own this market without a fight.

The third dynamic shaping the future of tablets is happening in emerging markets. In these markets, the smartphone rules the digital world. However, in most of these markets smartphones have been low end models with not a lot of features and, in many cases, small screens. Two things are happening in these markets that suggest the real growth, especially in consumer tablets, may be with tablets in the 6-7” range. What we have found is in emerging markets low end smartphones have actually introduced many to the world of computing. Once they buy a smartphone, they begin to realize what it can do and for many they find they want it to do more. Five years ago, that would have perhaps meant an interest in something like a small, cheap laptop. Now it means they most likely will graduate to a tablet instead. It is true cheap tablets have been big hits in emerging markets since most were in the $79 to $99 USD range. But they were cheaply made and at best served more like a portable media player for most. Most have stopped working or been put aside as useless beyond simple media consumption.

Now we are seeing real interest for tablets in emerging markets that deliver more processing power and a bigger screen that lets consumers do more. They are willing to buy tablets in the $129-$199 price range. They will never use a laptop or have to use mouse. Instead, this generation of users will be driven by touch input and, potentially, things like gestures and voice will become their UI. This is a big deal. For them, their window to the world of real computing could come through tablets. For many, this could be the only device they will use if they should want to do things that include productivity beyond their consumer consumption needs.

The other product they could buy that would impact tablet growth in emerging markets is just a larger smartphone that is coming down in price and becoming more affordable in these markets. Known as “phablets” they are are 5.5″ or 6″ in size and, since a lot of consumers overall don’t use smartphones or tablets for productivity, these phablets could be all they ever need.

I doubt our love affair with tablets is actually over. In some markets, it has just matured and for many in emerging markets it will become sort of a PC. But it does seem the meteoric rise of tablets over the last three years is over and we will probably just get to the point where tablets will sell around 350+ million per year steadily in the future.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

28 thoughts on “Why Has the Growth in Tablets Stalled?”

  1. PC’s were oversold. The venerable “most people” group who just wanted the basic functions of internet access and email either migrated to, or bought tablets in lieu of a PC. These are not computing enthusiasts, so having bought a tablet, they were done.

    During the last four years, tablets have been growing into a vacuum. Now we’re into replacement cycles.

    Might this be why?

  2. Our household owns 2 iPads.
    Both are “good enough”.
    No reason to buy a new one.
    Maybe in a few years.

  3. Outnumbered but unconvinced. ~ Ciao

    Like Ciao, I’m outnumbered, but unconvinced. I think that tablet sales will rebound in a big way and that this time period will be seen as an aberration.

    1. Will the rebound occur because of demand for current technology or because Apple or Samsung adds something very compelling? Right now, the iPad Air seems to over serve its job. I can’t think of anything that needs to be added to the Air to make it better. Apple might have a trick or two still to come but I don’t see it (but I am ready and willing to be surprised.)

      One thing that has been mentioned is a larger iPad. That might drive some sales but it isn’t interesting to me. The 9.7″ iPad Air seems to be a perfect middle ground between a laptop and a phone.

      Just curious if you have any thoughts on why the current slump in tablet sales is an aberration and what will cause a new upswing.

      1. I think it has to do with software limitations. The iPad has workflow issues when using it for anything more than casual browsing, games, etc. Extensions and iCloud Drive in iOS 8 should enable a new class of productivity apps.

    2. John, can you back this claim with objective data?

      I agree alot on the aruments posited by Tim because in large part, iPads are like Traditional PCs. They can be shared unlike phones.

      I agree also that theyll have to look elsewhere for new revenues. It was a brillant brillant move that theyre partnering with IBM to push enterprise/IT relevance for iOS thereby also helping the iPad case.

      1. “John, can you back this claim with objective data?” – Hawk_Eyes

        No. I generally believe that it is best to follow the evidence and all the evidence available today indicates a slowing in tablet adoption. However, it just doesn’t feel right to me. 1) For the rapid adoption of the tablet to stop so suddenly would be a bizarre exception to the normal rules of the product adoption cycle and 2) All the anecdotal and survey evidences indicates that tablets are not just popular , but often, well-loved. These two things are incompatible so I will suspend judgment and wait for a correction or for the evidence to correct me.

          1. “have you considered that the initial surge was the anomaly in the first place?” – Will

            Yes, but that doesn’t feel right. Unlike netbooks — which were very popular and then fell offf a cliff — tablet are still very well liked. The high satisfaction numbers and the dramatic slow down in sales is a paradox. Most have read it as a trend, but — as Space Gorilla points out in his comment, it’s a “trend” based on 1 or 2 quarters of data. I think there is something going on that we’re missing. I’m not willing the join the crowd yet. I’ll do so if the data continues to beat me over the head.

          2. “Well liked” — sure, but that may not influence purchasing. My opinion is that tablets are more like PCs in the sense that there’s no need to upgrade so often. Combine that with rapid saturation and that they can easily be shared in families… But I’m just speculating.

            It’s an interesting phenomenon that does not appear often, it will be interesting to view how it unfolds.

          3. “My opinion is that tablets are more like PCs in the sense that there’s no need to upgrade so often” – Will

            That may be true, but there are a slew of people who use tablets who never used a PC. The young, the old, the computer illiterate. For me, the slowdown in growth is very strange. Many have drawn their conclusions. I’m going to wait and see.

          4. I have never met anyone who uses a tablet exclusively. I’m sure it’s just personal anecdote

          5. “I have never met anyone who uses a tablet exclusively.” – Will

            I think my mother and a couple of her friends use the iPad as their one and only computing device.

        1. Aren’t we looking at a single quarter as evidence that iPad sales are slowing? I’m with you, I think iPad sales will be just fine. But it wouldn’t surprise me if iPad sales cooled down to a more normal pace. The first years were incredible, beating the iPhone to every milestone, I think it would be a little nuts for that pace to continue.

          I also think replacement cycles play into this, but it may be the PC cycle. What if consumers are slowly replacing their PCs with iPads? Seems like that would naturally be a slower pace. But the iPad itself doesn’t need to be replaced as often. I won’t need a new iPad for at least another year, and I use it like a PC, so I’m expecting to get a few years out of it for sure.

          There are many factors at play of course, but I generally view it as iPad sales going from insanely incredible to simply great. Technically that is a slowing down or cooling off, but it isn’t bad news.

          1. Agreed, but I still think it’s just a lull before the next wave, quite possibly a tidal wave.

        2. I suspect you’re correct in the assumption that the tablet market will continue to grow. We must still be in the early adopter stage, but some of them are people, frequently elderly, who have never owned, or struggled with PC’s. As they show their friends new found freedom, discovery and entertainment, I’m sure the new market will emerge, one that Steve has been targeting for ever.
          I’m amazed at the number of middle aged or elderly people amongst my acquaintance that have changed to, or entered “computing” with iPads. These are people that would never have considered a “Mac” as they were considered too expensive, weird, not enough programs or other such bs pushed by detractors and accepted as fact. Even devoutly anti Mac acquaintances now have iPhones or iPads.
          I can’t see why this won’t have a snowball effect and probably why Tim is always optimistic in his growth predictions (not the ones presented in quarterlies, but in general interviews).

  4. There is a duopoly in retina resolution tablets, Samsung and Apple. They both have kept retina resolution tablet prices high to increase their margins. If the price drops by $100, we will again see a hockey stick increase in sales.

    1. There’s NOT, to my knowledge, a duopoly in automobiles in the US, and yet Toyota, Honda, Nissan, Ford, GM and many others sell high-priced models that share many features with their mid- or low-priced siblings.

      I’m often critical of oligopoly markets, but I don’t think it helps understand pricing for premium products that appeal to a subset of people.

  5. “Indeed, we are already seeing people with 2 and 3 year old iPads or similar products that are very happy with what they have and it would take a dramatic new design or new features to get them to buy new models.”

    For me, that’s the biggest thing. I have an iPad3 and haven’t noticed any kinds of significant decrease in speed, even after installing iOS7 and several newer apps. The iPad air would be a nice-to-have but for me, it’s not essential. What I’ve got works fine and should continue to work fine.

    The only thing that might change that is the relative size of apps relative to my storage capacity. Games, for example, are now taking up mammoth amounts of space to the point where the last time I installed a mainstream iPad game, I had to go back and delete lots of apps just to make room. Assuming that continues and apps continue to take up more and more space, that may be a factor that could serve to accelerate the replacement cycle in the market.

    1. This is exactly why I’ve always been damningly critical of devices that don’t have expandable storage. Especially expensive ones. You shouldn’t have to buy a new device to expand your storage.

  6. You’re missing the biggest driving forces.

    1) The ipads are too expensive. I bought one for $750 and 18 months later I could not get the latest OS upgrade and it started to lag dramatically. Such a waste of money. Everyone I knew in the tech sector was pissed at apple. I mean, why buy a $700 phone when 18 months later it’s lagging already?

    2) Larger phone sizes means that you don’t need two devices. So many people I know carry the larger android device because it means they don’t need to buy, own or carry two devices.

    Newer smart phone users will not spend all this money. And contrary to what people think about purchases on Android vs Apple IOS, android users will start to spend more money using their smarthones as more of the economy becomes connected to cloud services. It’s predetermined, just like people using credit cards.

    It’s hard for me to imagine Apple growing anymore unless it comes out with something revolutionary again. But they don’t have Steve anymore so apple can’t just get what it want’s from partners. Steve was the ultimate salesman. You think big companies will listen to Tim Cook and bet everything on him and Apple like they did with Steve?

    I don’t think so.

    1. 1) Are you sure that is an iPad/iPhone your are talking about? I have a 2nd gen iPad and my wife has a 4s iPhone both with the latest iOS 7. Both are far older then 18 months.


    2. Only the original iPad (released in Apr 2010 with iOS 3.2 and discontinued on Mar 2, 2011) can’t install iOS 6/7/8. iPad pricing ranged from $499 to $829; 64 GB iPad cost $699; 32 GB iPad with cellular cost $729. iOS 6 was released in Sep 19, 2012, more than 18 months after iPad was discontinued. Less than 17000 units were sold, most to early adopters who understand the dangers of buying the first of a kind.

      Based on that, you chose to buy a high-end iPad model just as it was discontinued (and seemingly without much of a discount). You received two major iOS upgrades – to iOS 4 and then up to iOS 5.1.1 – just as Apple promised.

      iPad 2, released in Mar 2011 with iOS 4, is receiving iOS 8 in Sep 2014. It will get four iOS upgrades, 42 months later. So the situation you write about in 1) has not happened again with iPad.

    3. Perhaps you don’t know that many people in the “tech sector” then? Apple has gotten great marks in the tech press for providing updates to its “older” devices. While the Android tablets and phones are lucky to get even one major OS upgrade, Apple continues to offer iOS upgrades for years in some cases.

      I work in the tech sector and before you ask, I don’t sell Apple products, but I do take my iPad with me everywhere, to work, to service calls, back home to the living room and even to bed to read. iOS has some things I don’t like but after 34 years in the “tech sector” I can say unequivocally that my iPhone and iPad are simply the best purchases I’ve ever made. I am on my second of each now.

    4. Could you tell us which model iPad you bought and when you bought it? I don’t know of any new iOS device that couldn’t be OS upgraded 18 months later. And did you buy an iPad or an iPhone? Your story is a bit inconsistent.

  7. We’ve mostly all got our tablets already if we were going to get one. There are only a few reasons to buy another one this early on. Either your first one was lost, stolen, dropped hard, or like me, wanted upgrading to something better. I use mine so much I decided I wanted a faster one with more storage. My point is that the market might already be fairly saturated and for most there’s no compelling reason to buy another.

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