The New iPad and the Tablet Market

With new iPads in the rearview mirror, it’s time for the annual iPad sales frenzy again. The iPad has dominated and defined the tablet market every year since its launch in 2010. Sales of iPads and tablets grew at an annualized rate of more than 250 percent last year, but in the fourth quarter of 2012, the iPad’s market share rose to 57 percent, compared with 39 percent for Android tablets. Despite this decline, the iPad’s absolute unit numbers still showed impressive growth, underscoring the impressive growth of the tablet market.
Now, like any major Apple product launch, the iPad will drive sales and market share gains this quarter.
But what does the industry’s iPad market look like in the long run? To understand this, we need to understand the key products and market segments in the industry. Industry sectors evolve and have a significant impact on the development of the industry. We saw the beginning of this split with the likes of the Asus Transformer Prime and the Kindle Fire. Let’s take a look at these areas and how they affect iPad and the industry as a whole.
1) Multimedia Tablet Category –
Multimedia tablets can be defined as a general term for any touch screen. This part was created by Apple with the introduction of the iPad. This segment currently accounts for a large portion of the tablet industry, and with the launch of the Amazon Kindle Fire, competition in this segment has become very intense. Buyers of multimedia tablet PCs are mainly ordinary home users, and their usage patterns mainly focus on watching and using multimedia. For these consumers, the key factors influencing their purchasing decisions boil down to brand, price, and primary use. This is the main reason for the Kindle Fire’s short-term success. Depending on the target market for this product segment, most screen sizes and prices are on the lower end of the market (7 inches and above and $200-400). Competition in this space will intensify later this year as Google prepares to release Asus’s $200 quad-core Nexus tablet and Amazon prepares to release a refreshed Kindle Fire.
2) Mix tablet part.
Hybrid tablets are high-end tablets with a keyboard and trackpad dock. The form factor resembles an Ultrabook and is compatible with a mouse. The device was developed by ASUS alongside the original ASUS Transformer, and its popularity increased with the release of the ASUS Transformer Prime. Now other PC/tablet manufacturers have also seen this market segment and launched similar products one after another. While typing long emails/documents can only be done on touchscreen devices, hybrid tablets are gaining popularity as a solution.
Plus, it’s easy to use and holds the tablet with a keyboard or Bluetooth accessory attached.
In terms of usage models, hybrid tablets can be used for productivity or high-end gaming as well as multimedia tablets. Based on these usage patterns, the target groups for hybrid tablets are mainly high-end home/power users and business users. For these consumers, the most important factors influencing their purchasing decisions are power consumption, keyboard docking, long battery life, and large application libraries. Depending on the target market, most products have higher screen sizes and prices than the market (10 inches and above and $400-600).
How does this affect iPads? –
The new iPad and iPad 2 are still high-end and expensive ($400+) multimedia tablets, with no extra hybrid tablets. As these segment trends start to take hold over the next few years, the iPad will find itself somewhere in between these two worlds. Apple could fix this by offering a cheaper iPad (to the dismay of Steve Jobs) or an iPad with a keyboard. Launching a smaller, cheaper iPad would compete with Apple at much lower profit margins, threatening their industry-leading operating margins. The introduction of an iPad with a tablet dock is sure to dent sales of Apple’s most valuable product, the MacBook Air. Both strategies have their downsides, but they will be important if Apple hopes to become a major player in the industry.
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