Of course the topic of the week has been tablet PCs after all of the recent top tier OEM launches. Leading OEMs such as Acer, Amazon, Apple, Asustek, Google, Lenovo, Microsoft, Nokia, Samsung, and Sony have all launched tablet PCs of varying sizes and functionalities as well as supporting the array of leading OS platforms. Competition is healthy and tight, to be sure. Will the demand continue to be there, continues to be the vexing question.
Despite some market forecasts predicting a leveling off due to initial saturation of consumer markets for tablet PCs, the competition impact of reducing ASPs alongside of increased interactivity and multi-tasking is continuing to refresh demand. Not only has ASP pressure positively impacted demand by further lowering prices enticing more consumers to adopt tablet PCs, but the array of sizes and OS choices is also appealing to consumers. To be sure, the leading OEMs such as Apple are holding more steady on pricing, but entry-level tablets and white-box manufacturers in Asia, and notably China, have added to the transition favoring tablets over traditional laptop PCs.
According to recent research from NPD DisplaySearch:
Despite the current situation in China, much of the future growth for tablet PC shipments will come from the China and Asia Pacific regions. These regions will make up nearly 50 percent of the worldwide tablet PC segment by 2015, increasing to nearly 60 percent by 2017. In comparison, North America and EMEA, which combined will make up 50 percent of the market in 2013, will fall to 36 percent in 2017.
By 2017, shipments of tablet PCs are forecast to reach 534 million units, or 76 percent of the mobile PC market. Ultra-slim PC shipments are expected to increase slightly to 7 percent of the market, with 50 million units shipped. Meanwhile, standard notebook PC shipments are expected to fall to less than 112 million units, which is just 16 percent of the mobile PC market.
These growth forecasts are significant, particularly in light of the increased adoption and significant favoring of tablet PCs over other PC alternatives in emerging economies, as the NPD DisplaySearch research details. The price point difference with significantly lower ranges for tablet PCs in conjunction with the increased feature offerings are pushing tablet PC adoption in these new markets:
Declining average selling prices will drive shipment growth of tablets in the China and Asia Pacific regions. ASPs in China and Asia Pacific will fall from $285 in 2013 to less than $240 in 2017 with nearly 50 percent of tablets selling for less than $100. Major brands will increasingly offer low-priced tablet PCs to better compete against white-box tablet PC makers in the entry-level segments that are currently driving tablet PC adoption worldwide.
Supply and demand balancing act
Supply problem for Apple?
A recent report from iSuppli cautions that amidst the many devices and OEMs offering tablet PCs, that the most recently announced Apple iPad Mini may actually face supply issues and "fall far short of demand" in 4Q13:
Based on current supply data, shipments of the new iPad mini with Retina Display will fall below 4 million units and potentially amount to less than 3 million units in the fourth quarter. […]
Supply will improve substantially in the first quarter of 2014, but with Chinese New Year falling at the end of January, supply difficulties on the new mini could linger into February or March of 2014.
Microsoft sales strong
As TechCrunch recently reported, despite slower summer sales for Microsoft's Surface tablet PC, the 4Q13 outlook and current sales trend appear to be strengthening, according to recent statements from Microsoft:
Microsoft today reported that its Surface line of tablets had revenue of $400 million in the most recent quarter. On its earnings call, the company stated that in the most recent quarter (fiscal Q1, 2014), Surface unit volume doubled from the prior quarter (fiscal Q4, 2013). I confirmed the fact with Microsoft directly, following the statement. […]
In a call, Microsoft declined to forecast Surface revenue for the coming quarter.
So we’ll have to do it. I think that $600 million will be the absolute lower bound of “not terrible”; $800 million will be solid; and a $1 billion tally will be a win.
All in all, the general consensus for tablet PC compound annual growth rate (CAGR) for 2013-17 is roughly 16%, which is a very healthy level. Given the number of competitors, leading OEMs and OS platform choices along with size and pricing selections, there seems to be good reason to expect continued positive demand by consumers globally.