Author: Sameer Singh

This week IDC released tablet market estimates and the figures are quite a bit off from my original Q1 estimate, but eerily similar to my revised estimate based on NPD’s figures. Android tablets are poised to permanently steal the tablet market crown from the iPad, while Windows tablets continue to struggle. Let’s take a deeper look at the figures.

Android now leads the tablet market, with a share of 56.5 percent, while the iPad’s share falls below 40 percent. Windows tablets are still struggling, with a share below 4 percent and with struggling shipment figures, sell-through is always questionable.

As the first chart below shows, Android tablets made convincing gains over iPad in the last couple of quarters. This growth is really impressive considering the fact that it occurred in the midst of Apple’s hyped iPad Mini launch. This leadership shift is not unlike the one we saw in the smartphone market, which occurred around the timeframe of Apple’s iPhone 4 launch.

Apart from the leadership change, the most important takeaway from the chart is that Android tablets did not see a sequential decline in Q1. I had earlier stated that seasonality in tablet demand (especially for Android tablets) would reduce as emerging-market demand grows.

Based on the figures, I would say that demand for tablets in emerging markets has seen an explosion. This is very good news for low-cost tablet vendors, but not necessarily good news for Apple, Microsoft and the PC industry.

As I had previously showed, the growth of Android tablets in Q4 2012 was far more broad-based than in Q4 2011. Among leading Android OEMs, Samsung sees strong sequential gains, Asus maintains its position and Amazon’s tablet shipments take a sharp seasonal fall (sharper than I expected).

But the big story here is the performance of “Other Android Tablets”. These mid-range to low-end tablet vendors are mostly regional players, but will make more of a mark as we move forward. The Android platform enables these vendors to come out with products “good enough” for the masses at very low price points.

This will be a major factor in slowing shipments of PCs and Windows 8/RT tablets over the next few years.

Looking at the chart above, iPad shipments normally see strong growth in calendar Q2. However, this is always driven by a new product launch. CEO Tim Cook’s comments during Apple’s earnings call suggest that any new products will only launch in the fall, making Q4 the first full quarter after a new iPad/iPad Mini launch. This means that iPad shipments should see another sequential decline in Q2 (to ~17-18 million).

This dynamic, combined with exploding emerging-market demand for Android tablets, is likely to push Android’s market share above 60 percent (with shipments above 30 million).  This would essentially be a repeat of the iPhone vs. Android battle we saw in the smartphone market, over the past couple of years.

Reprinted with permission from Tech-Thoughts

Sameer Singh is an M&A professional and business strategy consultant focusing on the mobile technology sector. He is founder and editor of Tech-Thoughts.

Apple’s stock price tanked more than 12 percent the day after announcing fiscal 2013 first quarter earnings. Nine days later, shares are still down about 10 percent, in part because Q2 guidance came in below analyst consensus. The guidance, in particular, seems to have spooked investors as Apple announced its intentions to provide a realistic guidance, as compared to the usual “sandbagging”. The company also warned of lower margins — between 37.5 percent and 38.5 percent. In that context, let’s look at the average selling price movement chart and benchmark our previous iPad Mini cannibalization estimate.

The shipment chart above clearly shows that iPhone growth has slowed during the current product cycle, thanks to market saturation. This should give Apple even more incentive to launch a cheaper iPhone. In contrast, the iPad has seen reasonably strong growth, but as I predicted, iPad Mini cannibalization seems to have pushed Q1 shipments below market expectations.

The iPhone’s ASP has remained remarkably stable in Q1, given Apple’s move to exclude accessory revenue (~$10-$15 per device) from product categories. On the other hand, the iPad’s ASP took a nosedive because of the iPad Mini, especially compared to my ASP estimate of around $500 – the removal of accessory revenue doesn’t explain this fall, but it is directly related to cannibalization:

Benchmarking iPad Mini Cannibalization

My iPad sales estimate ranged from 24.5-26.2 million units, with iPad Mini cannibalization in the 50-percent to 70-percent range. At this point, I’m virtually certain that the higher end of my iPad Mini cannibalization estimate was accurate, but I seem to have missed something. In light of the limited iPad Mini supply, I had applied my cannibalization estimate on just iPad Mini sales and not iPad Mini demand, i.e. I inherently assumed that the iPad brand would cause the potential “cannibalized” iPad Mini buyer, to buy an iPad 2/iPad 4 in case of short supply. In hindsight, that seems to have been a silly assumption.

It looks like those particular iPad Mini buyers either delayed their purchase or purchased a competing product (most likely a comparable & cheaper android tablet). Given my previous analysis, this is the only explanation I can think of for iPad sales coming in at 22.9 million.

Market share figures for this quarter and iPad shipments over the next quarter should shed more light on purchasing decisions. If a majority of potential iPad Mini buyers delayed their purchases, we should expect the iPad to hold a 50-percent to 55-percent market share and iPad sales should remain strong or post a modest decline in Apple’s fiscal Q2. Today, IDC released tablet shipment estimates for calendar fourth quarter. Apple share fell to 43.6 percent, indicating a good many buyers chose not to wait for iPad mini. Combined share for ASUS and Samsung, which grew by several hundred present rose from 7.9 percent to 20.9 percent.

Reprinted with permission from Tech-Thoughts

Sameer Singh is an M&A professional and business strategy consultant focusing on the mobile technology sector. He is founder and editor of Tech-Thoughts.