Apple (NASDAQ: AAPL) No Longer Tablet King

Android Tablets Gain Traction


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By Swagato Chakravorty
Friday, May 31st, 2013

It looks like the Apple (NASDAQ: AAPL) iPad’s era of market share dominance may be coming to an end.

According to ABI Research, Apple maintained a 50 percent share of all tablets shipped out over Q1 of 2013. However, Android is poised to beat that within the near future, based largely on burgeoning demand from China, reports CNET.

ipadThe big thing about the Android platform is that various device manufacturers are able to bundle the operating system onto tablet devices that can cost as little as a fraction of the lowest-end iPad.

CNET quotes ABI’s Jeff Orr:

"It's inevitable that Android tablets will overtake iOS-powered slates, though we see no single vendor challenging Apple's dominance anytime soon," Jeff Orr, ABI senior practice director, said in a statement. "With media tablets commercially available for more than four years, momentum is shifting toward value and affordability, putting tablets in more of the population's reach."

The key thing to note, of course, is that comparing Apple to Android is misleading for two reasons. First, Apple makes devices as well as operating systems, while Android names an operating system that different device makers can license for use.

Second (and this follows from the first point), market share comparisons tend to be misleading, since you inevitably end up comparing a single manufacturer’s share of the market with a host of manufacturers relying on a single operating system. That’s why, as Orr points out, the rising market share of Android-based tablets may not do much to dent Apple’s command of the tablet market.

Apple notably sticks to fairly steady price points; the company rarely makes significant pricing adjustments, and these usually only occur with the introduction of a wholly new device (as when the iPod Shuffle or iPod Nano was introduced at a lower price point than the standard iPod offerings).

That’s where Android users and device manufacturers can claim an advantage. By not being thus limited in their choices, they can make or choose from a host of offerings, often at drastically lower price points.

Another tech research group, IDC, suggests that 55 percent of all tablet shipments over 2013 may end up in the sub-8” bracket, and that the average retail price for tablets could end up as low as $381 (that’s a decrease of 11 percent).

While Apple’s lead remains comfortable, the growth in competition from various Android-based tablets has been rapid, and manufacturers have taken note of Apple’s weakness in this area. Indeed, when Apple finally came out with the iPad Mini in late 2012, most media commentators didn’t fail to contrast it against Steve Jobs’ declaration in the past that such smaller tablets would never really catch on.

Demand for Smaller Tablets

I mentioned that China is playing a key role in the tablet wars. Although Apple remains the device manufacturer of choice over there, the mushrooming urban and middle classes also appear to insist on exercising their rights to choose other devices.

Affordability plays a big role in these decisions, and that’s where Apple’s “premium quality at premium price” approach hits a brick wall. This is what’s driving the exploding demand for tablet devices at low costs, and manufacturers are capitalizing on it.

Even Apple’s been affected by the shift. ABI’s figures suggest that 39 percent of all iPad revenues for the past quarter came off the iPad Mini, and that also happened to be Apple’s second-best quarter as far as iPad shipments were concerned. Evidently, more people are keen on smaller tablets than Jobs may have thought. ABI even predicts that the iPad Mini will come to dominate Apple’s iPad sales past June.

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What’s in all this for you? If you’re already sitting on Apple stock, you’re fine. The gorilla in the room isn’t going to go away anytime soon. If anything, expect significant jumps in Apple stock within the next few months. Several product lines have become overdue for refreshes (and this is an easy one, since Apple typically sticks to regular product refresh cycles). New products are definitely expected this year, which always bumps Apple to the top.

On the other hand, if you’re interested in the tablet sector, then take note of what’s going on in the “small tablet” area. Clearly there is ample demand, and it’s likely to grow as more and more people move into money and desire their first tablet.

The fact that the Android operating system allows for more choice in devices than Apple can with its vertically-integrated “OS+Device” model is also very significant and influences a lot of first-time tablet buyers’ choices. 

 

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