It turns out that selling tablets for peanuts isn’t such a great business plan after all, who knew?
Quit the biz
That’s got to be one way to see the recent Digitimes report, ‘Weak tablet demand prompting vendors to leave segment’, that tells us: “the current number of players that is still releasing tablet products is only one-third of the industry's peak.”
The report is dealing particularly with Chinese white box vendors, but it also reveals most tablet makers are reducing headcount or focusing on specific industry verticals.
The problem? No one was making any money. “Apple [is] the only player that is still able to achieve strong profits from the tablet sector,” says Digitimes.
Let’s not act surprised
You can’t stay in business if your business consists of attempting to undercut competitors. There is nothing to be gained from introducing iterations of the same thing when the only unique difference between the available devices is price.
Sure, some vendors may have hoped to create add-on services and peripherals income on the basis of the ecosystem their cheap products helped to create. In most cases they’ve failed.
Apple has not failed. The company has also refused to compete on price points, it’s focus is on providing superior solutions that are easy to use. That’s why iPads and iPad Pros remain among the best performing tablets money can buy.
They will only get better. Next year’s iPads will deliver faster refresh rates, smoother animation, better zoom and software improvements.
Round the corner
Frost & Sullivan expect growth to return to the iPad range next year, which marries well with predictions from elsewhere. Their analysis is that the incredible reception iPads received skewed perception of the true strength of the market. Everyone bought one at once, and it is only once the replacement cycle begins that we’ll see what the tablet industry is really made of.
At the same time, Apple’s focus on providing the best products is part of why it has ended up making billions of dollars selling its products across the planet. Its business is certainly more sustainable and ethical than its tax rate.
That’s not to say there isn’t some space for cheap tablets. “For some tasks a dirt-cheap second-rate system from a competitor makes sense. It’s not hard to find one, given competitors are pretty much giving their tablets away at unsustainably low prices in order to create the impression that Apple tablet is yesterday’s hero in terms of marketshare,” I wrote elsewhere.
Errors of judgement
Competitor made some big mistakes. They invested deeply in an industry they didn’t understand and must now exit it as IDC predicts the industry is about to see some recovery. Consumers will find themselves choosing between the best-in-class iPad Pro, Microsoft Surface devices, and tablets from Asus and Samsung.
A second Digitimes report also predicts improvement in the tablet market next year, warning that Android makers will be impacted by Chinese brands.
Jean Philippe Bouchard, research director at IDC, in a statement said. “We see smaller slate tablets being offered at very aggressive price points, leaving little room for revenues outside of a pure volume or platform play like for Amazon for instance.”
With a hugely lucrative services ecosystem to support it and a market identity as best-in-class, Apple’s iPad range stands in a great position to benefit from next year’s tablet explosion.
Meanwhile we can look forward to new Macs and the iPhone 7.
Apple sure seems to know how to keep things interesting.
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