Tablet sales growth slows dramatically

Users aren't replacing older tablets as quickly as earlier predicted, say IDC and Gartner

gyroscopio via Flickr

Even as Apple is set to launch new tablets on Thursday, the news about tablet sales isn't good.

Gartner and IDC both recently dramatically lowered their tablet shipment and sales estimates for 2014 and coming years, citing primarily the longer-than-expected time customers keep their existing tablets. (That phenomenon is called the "refresh rate.")

Gartner said today it had originally expected 13% tablet sales growth for the year globally; it has now lowered that growth rate to 11%. IDC's forecast change was even more dire: In June, it predicted shipment growth this year would be 12.1%, but in September it cut that number to 6.5%.

In the U.S., things are worse, because more than half of households have a tablet and may hold onto it for more than three years, well beyond analysts' earlier expectations.

IDC said in its latest update that tablet growth in the U.S. this year will be just 1.5%, and will slow to 0.4% in 2015. After that, it expects negative growth through 2018. Adding in 2-in-1 devices, such as a Surface Pro with a keyboard, the situation in the U.S. improves, although overall growth for both tablets and 2-in-1's will still only reach 3.8% in 2014, and just 0.4% by 2018, IDC said.

"Tablet penetration is high in the U.S. -- over half of all households have at least one -- which leads to slow growth...," Mikako Kitagawa, an analyst at Gartner, said in an interview. "A smartphone is a must-have item, but a tablet is not. You can do the same things on a laptop as you do with a tablet, and these are all inter-related."

Tablets are a "nice-to-have and not a must-have, because phones and PCs are enough to get by," added Carolina Milanesi, chief of research at Kantar Worldpanel.

In a recent Kantar survey of 20,000 potential tablet buyers, only 13% said they definitely or probably would buy a tablet in the next year, while 54% said they would not, Milanesi said. Of those planning not to buy a tablet, 72% said they were happy with their current PC.

At IDC, analyst Tom Mainelli reported that the first half of 2014 saw tablet growth slow to 5.8% (from a growth rate of 88% in the first half of 2013). Mainelli said the meteoric pace of past years has slowed dramatically due to long device refresh cycles and pressure from sales of large phones, including the new iPhone 6 Plus. That phone has a 5.5-in. display, which is close to some smaller tablets with 7-in. displays.

"As phone displays get larger, they are eating into the sales of 7-in. tablet displays," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "For those who want both a phone and a tablet, we are reaching a state of saturation. Vendors also aren't adding tablet feature improvements at a rate they once were."

Even though tablet growth has slowed, there will still be growth through 2018, at least globally. "All told, we expect the tablet market to continue to grow, but at a much slower rate than once predicted," Mainelli said.

"Strong demand for Apple's new larger-sized iPhones means the vast majority of consumers' tech spend in the second half of 2014 [in the U.S. and Western Europe] will go toward refreshing phones rather than tablets," he added.

Mainelli also said that IDC had once envisioned a three-year life cycle for tablets, dating back to when the first iPads were introduced in 2010. "But the reality is clearly longer as these devices -- moreso than other consumer electronics -- are typically handed down within a house.... Very few high-quality tablets are retired, with many staying in service...well beyond three years. The result is a swelling installed base and a lack of motivation to buy new products."

In other words, iPads essentially last too long. "When sub-$99 tablets get to be decently usable, we might well see consumers in mature markets with multiple tablets per person," Mainelli added.

Android tablets from a range of manufacturers, with some priced well below $100, will account for 65.7% of the global market this year, though that share will decline after that, even as the total volume of Android tablets grows, IDC predicted. For 2014, iPads will hold 28.9% of the global market, dropping to 26.6% by 2018, while Windows will grow from 4.9% to 11% by 2018, IDC said.

IDC predicted 233 million tablet and 2-in-1 shipments for all of 2014 globally, growing to 303 million in 2018. Gartner pegged tablet sales at 229 million this year, rising to 273 million in 2015.

Tablet growth chart IDC

Worldwide Tablet plus 2-in-1 shipments by OS, 2012-2018.

In addition to the longer refresh rate, tablets represent a transition in how people use computers that are subject to fads and adjustments to newer devices, even smartwatches, analysts said.

"Tablets won't go away, but the initial surge is mostly over and now tablets will behave much more like traditional computers than as the 'must have' new device," said Jack Gold, an analyst at J. Gold Associates. "Users will have multiple choices to make and will pick a tablet based on need and not just because they're cool."

Rob Enderle, an analyst at Enderle Group, said the tablet's useful lifetime is probably up to five years, and with the emergence of smartwatches alongside smartphones and laptops, he said tablets are the "most exposed" to declines in growth "because they are an in-between product."

Enderle also posited another interesting, if questionable, theory on why tablet growth is declining: the passing of Steve Jobs.

"Steve Jobs was the primary promoter of the tablet platform and no one has yet full filled his role since his departure," Enderle said. "Without active, effective promotion in this tablet segment, which wasn't very popular before Jobs, the segment appears to be returning to its roots."


Copyright © 2014 IDG Communications, Inc.

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