Tablets haven't been around for long, but they're already a strong market with a great deal of growth potential. Many competitors have risen in this space, some of them from the smartphone market, but their efforts may be too little, too late. The seat of power rests in Cupertino.
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Our Story Thus Far
Tablets have been slow to come to fruition. We first saw hints of them in 2009, when the tech press was abuzz with rumors about an upcoming tablet device from Apple. CES 2010 saw a number of tablets from various companies, but most were half-baked and never made it to the market. Apple, as it turned out, was the only company that brought a serious competitor to the market, releasing the iPad in April 2010 and selling 14.8 million units in 2010 alone, accounting for three quarters of the entire market.
We again saw numerous tablets at CES 2011, and this time around at least some of the promised devices have come to market. The most notable are likely the Motorola Xoom and Samsung Galaxy Tab 10.1, both of which are competent and powerful. These have put a small dent in Apple's worldwide market share, but the company still makes up 60% of the market. I highly suspect that North American and European sales numbers - if isolated - would show Apple making up a much larger portion of these important higher-margain markets. Apple traditionally focuses on these markets and doesn't even sell the iPad in many locations across the globe.
In any case, it's apparent that the current leader is Apple, and most forecasts show that this will continue until at least until 2015. I believe, however, that Apple will be the leader well after that for several important reasons.
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Tablets Are a Niche
Apple's walled garden approach will always prevent it from overtaking Windows as the primary operating system for PCs, and will also ensure decline in the company's smartphone market share.
Why? Because these markets are simply too large for one company, providing both hardware and software, to serve. The PC market consists of nearly 400 million units per year, while the smartphone market is expected to clear 450 million units in 2011 and is rising every year. No single company is capable of dominating these broad categories.
Smaller markets, however, can be handled by Apple with ease. Consider the iPod. Although is has arguably become obselete because of the rise of smartphones - and sales have indeed been dropping - the iPod still claimed over 75% of the U.S. market for MP3 players in 2010. Even in their best years, iPod sales were less than 60 million per year, but that represented a massive part of the market, squashing all other competition to the margins.
Tablets are far more similar to iPods than Smartphones or PCs. They are not a nescessity, but rather a luxury - an excellent media consumption device that no one absolutely needs but everyone would like to have. As such, it's likely that tablets will grow into a small but successful market that Apple can easily corner.
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The Competition Has Forgotten History
Indeed, there are many parrellels between the success of the iPod and that of the iPad. One common trait is the lack of competent competition. When Apple released the iPod in 2001, it caught the market flat-flooted. Although the concept of a mobile device capable of playing music was not unheard of, no one could present a competent competitor. Pioneers in the market such as Creative were promptedly handed their hat, and behemoths like Microsoft failed to make headway into the market.
Apple's hardware was met with some skepticism at first, not least of all because of limitations such as the use of FireWire and a hefty price tag of $399. Yet it was successful not only because its refused to compromise hardware quality for a lower price but also because of Apple's software, which included iTunes and eventually the iTunes store.
Today, Apple's iPad 2 offers obviously superior hardware to the competition. It's the most powerful, and it has a brilliant IPS display that most other tablets can't match. In addition to this, it provides a far better selection of software thanks not only to in-house products but also the massively popular iTunes store. Android's tablet marketplace is a 7-11 by comparison, and the other options in the market offer even less.
The competition to the iPad is simply behind, and there's no reason to believe that will change. Anyone hoping to beat the iPad needs to throw significant resources into the release of a cutting-edge tablet. Instead, companies like Motorola are releasing competent but half-hearted products with virtually no unique software and barely-there marketing campaigns. An iPad killer isn't going to appear by luck. It will require significant investment and a lengthy development period - and it doesn't appear anyone besides Apple is willing to make the commitment.
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There Is No Shelter
Of course, the same arguements could be made in regards to the iPhone. It was and remains an incredibly competent product, yet Android based Smartphones have managed to become the market share leader. This is often used to justify the idea that Android will also come to dominate the tablet market.
There are major differences between the tablet and smartphone market, however. The most important is the lack of carriers. Smartphones are useless without access to mobile data, and that must be provided by carriers, who certify certain phones for use with their networks. This limited Apple's market reach in the past, and will continue to do so in the future. As a result, Android was able to mature in a sheltered environment, protected from the iPhone by virtue of the fact that a majority of the market simply could not purchase it for use on their carrier.
Although tablets can be used on mobile data plans, they are not restricted to any specific carrier and many are limited to WiFi. The majority of potential tablet consumers can go out and buy any tablet they'd like - which means that all tablets are in direct competition with each other.
In addition, the smartphone market could never be cornered by Apple, as I explained in the first section of this article. It's too large and diverse, which gives room for competitors to survive and thrive even when their initial offerings aren't on par with what Apple offers. The tablet market is and will be smaller, leaving less room for competitors to carve their own niche.
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Where the iPad Goes From Here
Apple is a ferocious company. While not perfect, the tight focus of its products makes it difficult to defeat in those areas where it does choose to compete.
If I have mis-judged the tablet market - if it soars to become one consisting of hundreds of millions of units per year - then much of what I've written could be wrong. Such a large market would give the competition shelter and would be impossible for Apple to tame by itself, particularly in lower margin markets where it doesn't have a lot of influence, no matter the quality of its product.
I don't believe that's the fate of the tablet market, however. The latest reports indicate that tablet sales are already going down, rather than up, which is surprising. If this trend continues there won't be room for profitable Android tablets, and I suspect we'll see some companies that are entering the market choose to leave it, only further strengthing Apple's position.