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Apple maintains tablet lead despite weak quarter

Posted: 01 Nov 2013     Print Version  Bookmark and Share

Keywords:IHS  Apple  iPad  Samsung  Samsung 

According to the latest report from IHS, Apple Inc. in 3Q13 remained on top of the tablet business as it held onto its lead in shipments, despite losing unit market share in Q3. The company shipped 14.25 million iPads in Q3, including the mini and its larger 9.7in counterpart, giving the company a 29.7 per cent share of unit shipments. This represented a decrease from Apple's Q2 shipments of 14.62 million and its market share of 33.5 per cent, stated the market research firm.

Apple's weaker shipment performance in Q3 was primarily due to a shift in the company's product release cycle. The company changed from a two-pronged launch approach in 2012—with tablet launches in the spring and the fall—to a single fall release in 2013. The lack of a Q2 product release and anticipation of a Q4 product update resulted in tepid year over year sales in Q3.

No. 2 Samsung finished Q3 with 10.7 million shipments and a 22.2 per cent share. The South Korean firm has vigorously boosted tablet shipments during the last 12 months, increasing its share position by 8.1 percentage points. Meanwhile, Apple's share declined 12.7 percentage points during the same period.

Samsung has expanded its tablet line-up over the past year, mirroring the approach that has brought it success in the smartphone market, with an array of offerings geared to hit a variety of price points.

"The erosion in Apple's unit shipment market share was inevitable," said Rhoda Alexander, director, tablet research for IHS. "Cheaper almost always wins the volume race, and competitors were quick to adjust pricing when it became clear that it was impossible to achieve anything close to Apple's unit growth at the same price level. The resulting surge in sub-$250 alternatives catapulted Android to the leading operating system in tablets in 3Q13, but left vendors searching for profit in an increasingly competitive market."

Although Apple may be losing share on the unit shipment front, the contest tells only part of the story.

"Interestingly, in an environment where competitors on both the Android and Windows sides of the market are using price cuts as their most powerful marketing tool, Apple actually increased its revenue per iPad unit in Q3 by $3," Alexander noted. "Hardware profit plays a big role in Apple's success, enabling the design, durability and performance innovations that in turn support Apple's premium pricing."

Apple recently passed the 170 million mark in terms of cumulative units sold since the launch of the first iPad, easily eclipsing the 8.8 million units of other types of tablets shipped before Apple entered the market in 2Q10. Samsung, its closest competitor, has shipped 54 million units since it arrived in the tablet market in 4Q10.

Other tablet brands are also stepping up their game. Asus, which recently launched the second generation of its popular Nexus 7 tablet, had substantially stronger QoQ growth than either Apple or Samsung at an 87 per cent expansion. For its part, Lenovo's strong regional presence in China played a large role in its 94.6 per cent QoQr growth, but equally important is its strength in Europe and in emerging markets such as Latin America.

While vendors such as Samsung, Asus and Lenovo have all been a part of the growth of the Android OS in the tablet arena, much of the heavy lifting has been done by little-known, regional vendors based in China that have blanketed the globe with minimally configured, Android-based, 7.x-in tablets at price points of $100 or less.

"The growth in cheaply made, inexpensive Android tablets is a key piece of the growing imbalance between shipments and usage measurements in the tablet world," Alexander said. "The cheaper tablets tend to have much higher return and failure rates. This results in much shorter overall product lifetimes in the Android market than in the iOS space, and contributes to iOS still leading the tablet market in installed base, despite Android's lead in unit shipments over the past year. The size of the installed base is critical because it measures actual devices in use, a key metric for content and application developers."

Access to a global distribution network has also played a key role in the tablet market, with some of the early market leaders. Most notably Amazon has struggled to compete globally, as the market has shifted from one centred in North America to Europe, China, and emerging markets. The global sales networks that Apple, Samsung, Asus, Lenovo and Acer had in place before entering the tablet market have been critical to their individual successes, as has their ability to ride the coattails of the Android ecosystem. Amazon's decision to go it alone on the content side, with a customised version of Android, may still bring the firm long-term success in growing its sales base for the wider array of Amazon offerings, but some short-term hurdles could be present in the company's global expansion of its tablet sales.

"In an increasingly bifurcated tablet market, Apple has yet to experience any serious competition for the premier customer, particularly those users wanting to do more with a tablet than watch videos, surf the Web, and do email," Alexander noted. "Given Apple's recent system and software announcements, it is clearly moving beyond the basic consumer tablet market and targeting the remaining personal computer users."

With Windows-based tablets entering the market at prices less than the base unit of the newly configured iPad mini with Retina display, Apple is on track to lead the tablet market on revenue for years to come, IHS forecasted.

For more statistics and forecasts, click here.

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