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This: "Because Apple has used its plentiful cash to corner the market on key tablet components—like touch-screen displays—many competitors will find that the o

by shingen 15y ago

This: "Because Apple has used its plentiful cash to corner the market on key tablet components—like touch-screen displays—many competitors will find that the only way to make a tablet with comparable features but a lower price is to sell it at a loss. You can’t do that unless you have some other way to make money, like a big digital media store." That argument was used in regards to the iPhone as well. Apple's supposedly insurmountable component purchases would make it impossible for competitors to ... compete. And there's Android, out activating the iPhone three to one. Apparently those Android phones are either made out of cardboard, or the manufacturers found components. In reality, 2012 will be the year the iPad loses its market dominance in tablets. By the end of 2013, Apple will hold 1/4 to 1/3 of the market, which is exactly what their entire business model is designed around: lower market share, much higher margins.

davidcollantes 15y ago
I will remember and follow your forecast ("In reality...") very closely. A year from now I will be back to this one. We'll see.
- shingen 15y ago
  I hope you will. The assumptions by the slate article defy the nature of constantly improving hardware with falling prices. The iPad, unlike the iPhone, doesn't get to benefit from the carrier subsidies that hide the real price from consumers. The radical majority of iPad sales are the wifi model. The iPad will be left to compete straight up on price, much like Apple's PC products. Cheap tablets will dominate the market, Mr. Moore will make sure of it.
  - pooriaazimi 15y ago
    > The radical majority of iPad sales are the wifi model. I absolutely disagree. Unfortunately there is no data on how much each version of iPad has sold, but eBay says that Wi-Fi model accounts for about 60% of all (of their) iPad sales: http://www.quora.com/iPad/What-percentage-of-iPads-sold-are-3G http://www.quora.com/iPad/What-percentage-of-iPads-sold-are-... On the other hand, it's been rumored that Apple (at least for the first batch of iPad 2's) had ordered 60% 3G and 40% Wi-Fi: http://www.appleinsider.com/articles/11/02/04/over_60_of_apples_first_wave_ipad_2_production_to_be_3g_models.html http://www.appleinsider.com/articles/11/02/04/over_60_of_app... I believe the first (60% Wi-Fi), but still it's not * radical majority*.
  - rbarooah 15y ago
    Higher price performance ratios in things like CPU and RAM, are irrelevant without great software. Really great software for tablets takes massive resources to develop - e.g. GarageBand or the new iPhoto. At the moment, Android tablets are caught in a chicken and egg situation - there isn't enough penetration to justify massive development efforts, and this seems to be getting worse, not better. How do you see them overcoming this?
  - Anechoic 15y ago
    Cheap tablets will dominate the market, Mr. Moore will make sure of it. And much like in the music player market, I suspect the bulk of those cheap tablets will have an Apple logo on it. You do realize that Apple will also get to benefit from cheaper component prices? Only moreso than their competitors because they will be able to pre-order them in huge volumes.
2arrs2ells 15y ago
Agreed - Apple may be able to keep healthier margins than competitors because of its supply chain dominance, but it won't prevent them from making tablets. That said, who do you see Apple losing market dominance to this year (or next)? With phones, it was clear that carrier issues would prevent Apple from having massive market share. But carriers have little to no impact on tablet sales.
Lewisham 15y ago
But isn't it the case that the iPad is being manufactured much more cheaply than the competitors can (eg. the Xoom) because of Apple's manufacturing processes? Phones are a slightly different beast. FWIW, I think it's Apple's game to lose. The iOS 5 today uses the exact same interface as the iOS we saw 5 years ago. Eventually someone is going to iterate their software past Apple, and then we'll see whether Apple has the software vision to keep up (I'm thinking they don't).
- shingen 15y ago
  You mean China's manufacturing processes. Foxconn isn't going to hand Apple a permanent monopoly over efficient processes to the detriment of their domestic buddies. That's not how China works. Every day that goes by, Apple's lead will erode in both quality of product and manufacturing advantage. It's not due to anything Apple will do wrong, it's due to how markets work, particularly in technology.
  - batista 15y ago
    You mean China's manufacturing processes. Foxconn isn't going to hand Apple a permanent monopoly over efficient processes to the detriment of their domestic buddies. That's not how China works. For one, Foxconn is Taiwanese, not Chinese, it's just that it has factories in China. Second, money is how China works. Where does the delusion comes that China will ...sabotage Apple in chinese factories in order for Chinese device makers to win? As a matter of fact, China is opening to be Apple's largest market, with raving reception this past year.
    - ceejayoz 15y ago
      Sabotage, no. Copy wholesale, sure.
      - r00fus 15y ago
        > Sabotage, no. Copy wholesale, sure. Tell me... how is "China" going to copy Apple's well-curated ecosystem of apps, content and accessories?
sudoscience 15y ago
IPod was not a low market share product. The MacBook likely has more than 25% market share already and it will grow. Apple doesn't need that model anymore, they can have it both ways. All that said, I do agree their tablet share will go down as competition increases, Android is too mature for someone not to close the gap in the next year.
- phpnode 15y ago
  > The MacBook likely has more than 25% market share already Perhaps where you're sitting, but in my experience, it's more like 5%
deleted 15y ago
[deleted]
strandev 15y ago
What will be different for Android tablets in 2012 compared to Android tablets in 2011? The success of Amazon and the B&N last year seems like it would make it even harder for Android tablets to find a foothold this year.
- ktsmith 15y ago
  As a kindle fire owner I think Amazon could be beaten in the tablet market quite easily. It's a mediocre device though I don't think Amazon cares that much as it's clearly just designed to consume Amazon sold content.
  - RandallBrown 15y ago
    It's a mediocre device, but that's the whole point of it. It's only 200 dollars. It's the cheapest and easiest way to consume Amazon content and that strategy will happily coexist with the iPad. (I think)
    - ktsmith 15y ago
      I believe it will co-exist with the iPad as well since it targets two different markets. I simply think another vendor with a slightly better device in that price range could beat amazon at their own game. Slightly better speakers and not using the poorly designed amazon app store would get me to pony up another $200.
- icefox 15y ago
  Google chrome shipping with android will be a big difference. Web Browsing is a good chunk of what users use their tablets for.
batista 15y ago
And there's Android, out activating the iPhone three to one. Apparently those Android phones are either made out of cardboard, or the manufacturers found components. Those 3-1 are in the cheaper end of the market. Those devices could as well be made out of cardboard. You can't compare Android vs iPhone sales by lumping "get for free with a contract" Android devices in the lower tier of the market. They are sold to people who don't even care about the "smart" in smartphones, anyway. That's why the iPhone has more profit despite less market share, and that's why the iOS App ecosystem makes 5 times the money the Android one does, and that's why iPhone users use 80% of the mobile web traffic while there are more Android devices.
- quanticle 15y ago
  You can't compare Android vs iPhone sales by lumping "get for free with a contract" Android devices in the lower tier of the market. They are sold to people who don't even care about the "smart" in smartphones, anyway. Uh, that's a pretty bold assertion to make without bringing any data to back it up. How do you know that those consumers don't care about data access? How do you know that they don't "care about the 'smart' in smartphones"?
  - RegEx 15y ago
    Around here, pretentiousness is all the evidence you ever need.
  - r00fus 15y ago
    Look, I know "plural of anecdote != data", but I know several (5) people who have purchased a smartphone in the past 6 months, including myself. 2 got droids, 3 got iphones. I've know the rough usage patterns of all the folks by asking what apps/services they use. The droid users use it as a 1) phone, 2) email/message device, 3) maps and 4) one or two apps (not games). Basically, a google core-apps phone. One of the iPhone users is similar to the droid users (in addition, using the phone for taking photos/videos often). Now the two remaining iPhone users are heavy data-folks. Both use bluetooth accessories, and in addition to the above uses, also play games, do twitter/social sharing, run lots of web searches. Not a single of these users tethers or does advanced remote computing (ie, shell/vnc) - so are more "mainstream" users.
InclinedPlane 15y ago
Indeed. The idea that the rest of the consumer electronics industry is incapable of competing on price/performance even at a component level flies in the face of decades of history in the industry. Apple has a temporary advantage because they have used their cash reserves well and they have designed good products. But only a sycophant or a fool would believe that their advantage would last forever. Edit: the comparison to the iPhone is apt, as modern phones such as the Galaxy Nexus are every bit as good as the iPhone in many ways and superior in others (more RAM, faster CPU, LTE, NFS, better front-facing camera, etc.)
- SystemOut 15y ago
  Apple has iTunes which gives it a distinct advantage over competing with hardware manufacturers. Users care about content. Why else would the top three tablets by sales be the iPad, the Fire and the Nook? Android still doesn't have a viable market there and no one has shown that they can step up to the plate with an integrated, viable marketplace. Once that happens then it's a new game. Until then, I don't see anyone unseating Apple. They can sell the things at a loss and still make money via the long tail if they wanted to.
  - InclinedPlane 15y ago
    That's a fine argument, but it's an entirely different line of reasoning than this thread.
- AlexandrB 15y ago
  > more RAM, faster CPU, LTE, NFS, better front-facing camera, etc. Beyond bragging rights, how much of Apple's market actually cares about this? At home I run a PC I built myself and have Linux running in various places and even I don't care what CPU/RAM specs my phone has. My decision to buy an iPhone was driven by my existing collection of iOS apps (I used an iPod as a PDA for a few years) and the general reliability of the iOS experience (stuff doesn't stutter, webpages render properly, few/no OS-level crashes, etc). Things like the camera were a definite plus but not deciding factors. The retina display was probably the biggest selling point of a 4/4S over a 3GS actually since it makes the whole iOS experience even more pleasant.
redcircle 15y ago
I'm happy that their business model is designed around lower market share, with higher quality product, but I don't see how they will lose market share in tablets. There just isn't anything comparable for the whole experience of using the iPad (e.g., having access to content from the iTunes stores, including videos; or being supported with software updates for many years; or having access to a local Apple store where I can send my Dad when he needs help). Plus, the potential competitors just don't seem to get that the iPad is more than hardware and software --- the iPad provides a paradigm shift that many customers want, such as being locked down and which can't be pawned while browsing the Internet, and which can't be pawned by incompetent developers (e.g., button bars for the web browser). It is similar to game consoles.
poutine 15y ago
Just like what happened with the iPod and iPod Touch, right?
- beatle 15y ago
  Hah! very true. Also, people are forgetting about the iPad 2. it's $100 cheaper. "In reality, 2012 will be the year the iPad loses its market dominance in tablets. By the end of 2013, Apple will hold 1/4 to 1/3 of the market, which is exactly what their entire business model is designed around: lower market share, much higher margins."
- shingen 15y ago
  Completely different market dynamics. Consumers don't all want to own the same smart phone, in fact quite the opposite: consumers are completely unwilling to all own the same smart phone. Then to top it off, the smart phone market is roughly 20 to 30 times larger than the iPod market. Which means a helluva lot more competition. There's also no simple blocking method available to Apple to own the smart phone market, unlike the iTunes + music licensing moat they had in music players.
  - poutine 15y ago
    Smart phone? I agree smart phones are different. My somewhat glib inference was that the iPad could maintain the same market dominance as the iPod Touch due to similar reasons.
    - shingen 15y ago
      The iPad has no more of a moat around it than the iPhone does. The iPod had a moat around it courtesy of the extremely difficult dynamics of dealing with the music cartels. Apple broke the cartels and came to dominate them; nobody else was able to. Such problems don't exist in either smart phones or tablets.
      - tosseraccount 15y ago
        Apple broke the cartels? Actually it was Napster and bittorrent that broke the cartels. Apple saved what was left of the cartels.
bonch 15y ago
"In reality, 2012 will be the year the iPad loses its market dominance in tablets. By the end of 2013, Apple will hold 1/4 to 1/3 of the market, which is exactly what their entire business model is designed around: lower market share, much higher margins." People said this every year about the iPod, and they've been saying it every year since the iPad's introduction. Without carrier infrastructure to push budget Android smartphones, Android just doesn't appeal to most consumers. If you actually believe that 2012 is the year the iPad stops being dominant, you are living in a total delusion. Maybe you hate Apple and are letting that cloud your analysis. By the way, iOS surpassed Android's U.S. marketshare last quarter due to the iPhone 4S.
gnaffle 15y ago
2011 was also supposed to be the year of the clones. We'll see about 2012 and 2013. As mentioned in the article, by looking at sales numbers so far, the iPad launch looks much more like the iPod than the iPhone.
2muchcoffeeman 15y ago
I'm not convinced that Apple has played the "supply chain" card yet. Look at their prices. They get set on release and don't change for the rest of the year. Their margins probably get slightly fatter over the year. The iPhone starts to look over priced at the end of its life cycle. If you look at their profits in phones last year, Apple are making (by my estimate) $31 for every $1 their competitors make (8.7% market share 75% profits). Look at how much Apple can slash prices and still have the majority of profits. We have not seen Apple get aggressive on pricing.

by shingen 15y ago

davidcollantes 15y ago

I will remember and follow your forecast ("In reality...") very closely. A year from now I will be back to this one. We'll see.

shingen 15y ago
I hope you will. The assumptions by the slate article defy the nature of constantly improving hardware with falling prices. The iPad, unlike the iPhone, doesn't get to benefit from the carrier subsidies that hide the real price from consumers. The radical majority of iPad sales are the wifi model. The iPad will be left to compete straight up on price, much like Apple's PC products. Cheap tablets will dominate the market, Mr. Moore will make sure of it.
- pooriaazimi 15y ago
  > The radical majority of iPad sales are the wifi model. I absolutely disagree. Unfortunately there is no data on how much each version of iPad has sold, but eBay says that Wi-Fi model accounts for about 60% of all (of their) iPad sales: http://www.quora.com/iPad/What-percentage-of-iPads-sold-are-3G http://www.quora.com/iPad/What-percentage-of-iPads-sold-are-... On the other hand, it's been rumored that Apple (at least for the first batch of iPad 2's) had ordered 60% 3G and 40% Wi-Fi: http://www.appleinsider.com/articles/11/02/04/over_60_of_apples_first_wave_ipad_2_production_to_be_3g_models.html http://www.appleinsider.com/articles/11/02/04/over_60_of_app... I believe the first (60% Wi-Fi), but still it's not * radical majority*.
- rbarooah 15y ago
  Higher price performance ratios in things like CPU and RAM, are irrelevant without great software. Really great software for tablets takes massive resources to develop - e.g. GarageBand or the new iPhoto. At the moment, Android tablets are caught in a chicken and egg situation - there isn't enough penetration to justify massive development efforts, and this seems to be getting worse, not better. How do you see them overcoming this?
- Anechoic 15y ago
  Cheap tablets will dominate the market, Mr. Moore will make sure of it. And much like in the music player market, I suspect the bulk of those cheap tablets will have an Apple logo on it. You do realize that Apple will also get to benefit from cheaper component prices? Only moreso than their competitors because they will be able to pre-order them in huge volumes.

2arrs2ells 15y ago

Agreed - Apple may be able to keep healthier margins than competitors because of its supply chain dominance, but it won't prevent them from making tablets. That said, who do you see Apple losing market dominance to this year (or next)? With phones, it was clear that carrier issues would prevent Apple from having massive market share. But carriers have little to no impact on tablet sales.

Lewisham 15y ago

But isn't it the case that the iPad is being manufactured much more cheaply than the competitors can (eg. the Xoom) because of Apple's manufacturing processes? Phones are a slightly different beast. FWIW, I think it's Apple's game to lose. The iOS 5 today uses the exact same interface as the iOS we saw 5 years ago. Eventually someone is going to iterate their software past Apple, and then we'll see whether Apple has the software vision to keep up (I'm thinking they don't).

shingen 15y ago
You mean China's manufacturing processes. Foxconn isn't going to hand Apple a permanent monopoly over efficient processes to the detriment of their domestic buddies. That's not how China works. Every day that goes by, Apple's lead will erode in both quality of product and manufacturing advantage. It's not due to anything Apple will do wrong, it's due to how markets work, particularly in technology.
- batista 15y ago
  You mean China's manufacturing processes. Foxconn isn't going to hand Apple a permanent monopoly over efficient processes to the detriment of their domestic buddies. That's not how China works. For one, Foxconn is Taiwanese, not Chinese, it's just that it has factories in China. Second, money is how China works. Where does the delusion comes that China will ...sabotage Apple in chinese factories in order for Chinese device makers to win? As a matter of fact, China is opening to be Apple's largest market, with raving reception this past year.
  - ceejayoz 15y ago
    Sabotage, no. Copy wholesale, sure.
    - r00fus 15y ago
      > Sabotage, no. Copy wholesale, sure. Tell me... how is "China" going to copy Apple's well-curated ecosystem of apps, content and accessories?

sudoscience 15y ago

IPod was not a low market share product. The MacBook likely has more than 25% market share already and it will grow. Apple doesn't need that model anymore, they can have it both ways. All that said, I do agree their tablet share will go down as competition increases, Android is too mature for someone not to close the gap in the next year.

phpnode 15y ago
> The MacBook likely has more than 25% market share already Perhaps where you're sitting, but in my experience, it's more like 5%

deleted 15y ago

[deleted]

strandev 15y ago

What will be different for Android tablets in 2012 compared to Android tablets in 2011? The success of Amazon and the B&N last year seems like it would make it even harder for Android tablets to find a foothold this year.

ktsmith 15y ago
As a kindle fire owner I think Amazon could be beaten in the tablet market quite easily. It's a mediocre device though I don't think Amazon cares that much as it's clearly just designed to consume Amazon sold content.
- RandallBrown 15y ago
  It's a mediocre device, but that's the whole point of it. It's only 200 dollars. It's the cheapest and easiest way to consume Amazon content and that strategy will happily coexist with the iPad. (I think)
  - ktsmith 15y ago
    I believe it will co-exist with the iPad as well since it targets two different markets. I simply think another vendor with a slightly better device in that price range could beat amazon at their own game. Slightly better speakers and not using the poorly designed amazon app store would get me to pony up another $200.
icefox 15y ago
Google chrome shipping with android will be a big difference. Web Browsing is a good chunk of what users use their tablets for.

batista 15y ago

And there's Android, out activating the iPhone three to one. Apparently those Android phones are either made out of cardboard, or the manufacturers found components. Those 3-1 are in the cheaper end of the market. Those devices could as well be made out of cardboard. You can't compare Android vs iPhone sales by lumping "get for free with a contract" Android devices in the lower tier of the market. They are sold to people who don't even care about the "smart" in smartphones, anyway. That's why the iPhone has more profit despite less market share, and that's why the iOS App ecosystem makes 5 times the money the Android one does, and that's why iPhone users use 80% of the mobile web traffic while there are more Android devices.

quanticle 15y ago
You can't compare Android vs iPhone sales by lumping "get for free with a contract" Android devices in the lower tier of the market. They are sold to people who don't even care about the "smart" in smartphones, anyway. Uh, that's a pretty bold assertion to make without bringing any data to back it up. How do you know that those consumers don't care about data access? How do you know that they don't "care about the 'smart' in smartphones"?
- RegEx 15y ago
  Around here, pretentiousness is all the evidence you ever need.
- r00fus 15y ago
  Look, I know "plural of anecdote != data", but I know several (5) people who have purchased a smartphone in the past 6 months, including myself. 2 got droids, 3 got iphones. I've know the rough usage patterns of all the folks by asking what apps/services they use. The droid users use it as a 1) phone, 2) email/message device, 3) maps and 4) one or two apps (not games). Basically, a google core-apps phone. One of the iPhone users is similar to the droid users (in addition, using the phone for taking photos/videos often). Now the two remaining iPhone users are heavy data-folks. Both use bluetooth accessories, and in addition to the above uses, also play games, do twitter/social sharing, run lots of web searches. Not a single of these users tethers or does advanced remote computing (ie, shell/vnc) - so are more "mainstream" users.

InclinedPlane 15y ago

Indeed. The idea that the rest of the consumer electronics industry is incapable of competing on price/performance even at a component level flies in the face of decades of history in the industry. Apple has a temporary advantage because they have used their cash reserves well and they have designed good products. But only a sycophant or a fool would believe that their advantage would last forever. Edit: the comparison to the iPhone is apt, as modern phones such as the Galaxy Nexus are every bit as good as the iPhone in many ways and superior in others (more RAM, faster CPU, LTE, NFS, better front-facing camera, etc.)

SystemOut 15y ago
Apple has iTunes which gives it a distinct advantage over competing with hardware manufacturers. Users care about content. Why else would the top three tablets by sales be the iPad, the Fire and the Nook? Android still doesn't have a viable market there and no one has shown that they can step up to the plate with an integrated, viable marketplace. Once that happens then it's a new game. Until then, I don't see anyone unseating Apple. They can sell the things at a loss and still make money via the long tail if they wanted to.
- InclinedPlane 15y ago
  That's a fine argument, but it's an entirely different line of reasoning than this thread.
AlexandrB 15y ago
> more RAM, faster CPU, LTE, NFS, better front-facing camera, etc. Beyond bragging rights, how much of Apple's market actually cares about this? At home I run a PC I built myself and have Linux running in various places and even I don't care what CPU/RAM specs my phone has. My decision to buy an iPhone was driven by my existing collection of iOS apps (I used an iPod as a PDA for a few years) and the general reliability of the iOS experience (stuff doesn't stutter, webpages render properly, few/no OS-level crashes, etc). Things like the camera were a definite plus but not deciding factors. The retina display was probably the biggest selling point of a 4/4S over a 3GS actually since it makes the whole iOS experience even more pleasant.

redcircle 15y ago

I'm happy that their business model is designed around lower market share, with higher quality product, but I don't see how they will lose market share in tablets. There just isn't anything comparable for the whole experience of using the iPad (e.g., having access to content from the iTunes stores, including videos; or being supported with software updates for many years; or having access to a local Apple store where I can send my Dad when he needs help). Plus, the potential competitors just don't seem to get that the iPad is more than hardware and software --- the iPad provides a paradigm shift that many customers want, such as being locked down and which can't be pawned while browsing the Internet, and which can't be pawned by incompetent developers (e.g., button bars for the web browser). It is similar to game consoles.

poutine 15y ago

Just like what happened with the iPod and iPod Touch, right?

beatle 15y ago
Hah! very true. Also, people are forgetting about the iPad 2. it's $100 cheaper. "In reality, 2012 will be the year the iPad loses its market dominance in tablets. By the end of 2013, Apple will hold 1/4 to 1/3 of the market, which is exactly what their entire business model is designed around: lower market share, much higher margins."
shingen 15y ago
Completely different market dynamics. Consumers don't all want to own the same smart phone, in fact quite the opposite: consumers are completely unwilling to all own the same smart phone. Then to top it off, the smart phone market is roughly 20 to 30 times larger than the iPod market. Which means a helluva lot more competition. There's also no simple blocking method available to Apple to own the smart phone market, unlike the iTunes + music licensing moat they had in music players.
- poutine 15y ago
  Smart phone? I agree smart phones are different. My somewhat glib inference was that the iPad could maintain the same market dominance as the iPod Touch due to similar reasons.
  - shingen 15y ago
    The iPad has no more of a moat around it than the iPhone does. The iPod had a moat around it courtesy of the extremely difficult dynamics of dealing with the music cartels. Apple broke the cartels and came to dominate them; nobody else was able to. Such problems don't exist in either smart phones or tablets.
    - tosseraccount 15y ago
      Apple broke the cartels? Actually it was Napster and bittorrent that broke the cartels. Apple saved what was left of the cartels.

bonch 15y ago

"In reality, 2012 will be the year the iPad loses its market dominance in tablets. By the end of 2013, Apple will hold 1/4 to 1/3 of the market, which is exactly what their entire business model is designed around: lower market share, much higher margins." People said this every year about the iPod, and they've been saying it every year since the iPad's introduction. Without carrier infrastructure to push budget Android smartphones, Android just doesn't appeal to most consumers. If you actually believe that 2012 is the year the iPad stops being dominant, you are living in a total delusion. Maybe you hate Apple and are letting that cloud your analysis. By the way, iOS surpassed Android's U.S. marketshare last quarter due to the iPhone 4S.

gnaffle 15y ago

2011 was also supposed to be the year of the clones. We'll see about 2012 and 2013. As mentioned in the article, by looking at sales numbers so far, the iPad launch looks much more like the iPod than the iPhone.

2muchcoffeeman 15y ago

I'm not convinced that Apple has played the "supply chain" card yet. Look at their prices. They get set on release and don't change for the rest of the year. Their margins probably get slightly fatter over the year. The iPhone starts to look over priced at the end of its life cycle. If you look at their profits in phones last year, Apple are making (by my estimate) $31 for every $1 their competitors make (8.7% market share 75% profits). Look at how much Apple can slash prices and still have the majority of profits. We have not seen Apple get aggressive on pricing.