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Crowded Tablet Market Needs to Shrink

Are you backing the wrong horse in the crowded smartphone and tablet device market? Before your company bets its supply chain and scarce resources on a “most-likely-to-fail-player” in the tablet device market, perhaps you should pay close attention to what EBN readers have to say about who are likely to be the likely leaders.

Our most recent poll had received 360 responses — at my last count on Tuesday, January 18 — to the question: Which company will be No. 1 in smartphone and tablet? More than half of the respondents (192, or approximately 53.3 percent) gave their vote to {complink 379|Apple Inc.}, good news for the folks at Cupertino, Calif., dealing with the disturbing news of the health challenge facing CEO Steve Jobs. (See: Smartphone & Tablet Device War and Apple’s Jobs to take Medical Leave of Absence .)

Apple's leadership in the smartphone market isn't overwhelming. Strong competition is continuing or has emerged from the likes of {complink 12925|Motorola Mobility Inc.}, {complink 3847|Nokia Corp.}, {complink 4751|Samsung Electronics Co. Ltd.}, and {complink 5117|Sony Ericsson Mobile Communications} as well as manufacturers in Japan and China. However, in terms of name recognition none of these competitors has a product in the market that sparkles quite as brilliantly as Apple's iPhone4.

The company's fame in the digital music player and smartphone markets is being translated into the tablet device sector, and many of our respondents believe Apple will be the company to beat in this segment, too. Although there had been other tablet-like devices in the market before Apple introduced the iPad last year, the company has quickly gained a large following. Recent products from Motorola Mobility, Samsung, and half a dozen or more other companies have also received rave reviews, but the iPad is still king of the hill.

Will this change? And how dramatic will any evolution be? It is unlikely that Apple will be able to maintain its huge leadership in the tablet market. Although products from rivals have yet to be fully tested in the market, they will eventually whittle down the iPad's market share. Yet, if more than 50 percent of EBN's readers are to be believed — and I am one of those who trust their judgment — Apple will keep a double-digit share of the market for quite a while.

Respondents gave Samsung a 13.1 percent chance of becoming the No. 1 vendor of smartphones and tablet devices, followed by Nokia with approximately 10.3 percent, Motorola Mobility at 8.3 percent, HTC at 6.7 percent, and the rest of the gaggle — {complink 38|Acer Inc.}, {complink 1544|Dell Inc.}, and {complink 2376|Hewlett-Packard Co.} — far behind with low single-digit votes. The options available to respondents did not include {complink 4644|Research In Motion Ltd. (RIM)}, maker of the BlackBerry device. We plan to correct this unintended oversight with another poll in the near future.

I drew one major lesson from this admittedly unscientific poll: that the market for smartphones and tablet devices is too crowded, and a winnowing is most likely to happen over the next few years as consumers settle on a handful of companies. Many of the current players will either fade away or become niche marketers focused on certain regions or producing for specialty applications in the industrial and manufacturing sectors.

The huge volume manufacturers in my opinion — in no particularly order — will most likely include Apple, Samsung, Nokia, Motorola Mobility, Research in Motion, and HTC. Even this group will eventually be forced to engage in a brutal price war or become highly selective in their offerings, catering, for instance, to high-end consumers and corporate customers.

If this outlook proves even half-true, the electronics supply chain may be in for a rude shock. The same sifting happened in the once crowded PC market until commoditization and low gross profit margins forced the exit of manufacturers like {complink 2470|IBM Corp.} from the sector, and a few major players with highly engineered and extremely cost-effective supply chain structures emerged.

In such a market, suppliers and contractors know their future will depend on supporting a sure winner, but how do you pick such a company at this early stage in the game? My suggestion is to bet on a sure winner but make room in your portfolio for a dark horse. That's where the big bucks are.

9 comments on “Crowded Tablet Market Needs to Shrink

  1. Parser
    January 19, 2011

    The sure winner at present is Apple Inc., but there is nothing sure about it. Some political decisions in China my flip the coin at any time. There were over 80 new tables computers similar to iPad introduced this year. The competition is high and fall out, like you pointed out, will be in producers and buyers. Should consumer diversify, and who is the dark horse? 

  2. AnalyzeThis
    January 19, 2011

    I certainly agree that the tablet market is way too crowded. Yes, tablets are cool, we get it, but too many companies have jumped on the bandwagon (in my opinion) and there simply is not enough demand.

    Consumers looking for a tablet are indeed faced with a difficult choice: there are a wide variety of options at fairly diverse price points.

    But at an enterprise-level, I believe your choices are simple: Apple or RIM.

    If I were backed into a corner and forced to deploy tablets company-wide, I'd hitch my horse to RIM simply due to their experience dealing within an enterprise architecture (thanks to BlackBerry) and their increased focus on something I think we all can agree is very important: security. With the iPad, despite its walled garden approach to apps, I am still not sold on the security of the platform… especially after that early leak which occurred shortly after its release.

    But, again, on the consumer-level… I think it's really hard to pick winners and losers at this point. Nearly all the companies you listed are doing at least one or two interesting and/or unique things with their take on the form factor. I guess we'll see!

  3. jbond
    January 19, 2011

    I feel that RIM has the best chance to gain market ground on Apple and to stay for the long haul. RIM has a large following of business Blackberry users that would love to have all the same capabilities, just on a larger scale. The Ipad is a great tablet. It is in essence just a large Iphone or Ipod Touch. This helps Apples market share grow by being more youth oriented. RIM is still going to have a large business following, which should offer longevity and growth to stay ahead of any other contenders.

    I agree that these other companies should not be counted out just yet. If one of them grabs onto a niche market and word spreads, they could stand the test of time and be a third player in the market.

  4. Hawk
    January 19, 2011

    I can see the coming blood bath but it's not just the companies that fail that will get hurt. Many of the consumers will buy products that won't get supported anymore once the manufacturers exit the sector or becoming bit players. Be smart choosing the companies you want to party with or just make sure the supply contracts are ironclad. The OEMs must pay upfront for components so suppliers don't get hurt. Does that still happen anyway — I mean, do suppliers get OEMs to pay up or are they still left to pick up the tab for unwanted OEM parts?

  5. elctrnx_lyf
    January 20, 2011

    Every one is talking about the tablet including CES and all the news papers and magazines but who is going to buy these device actually. More than the device the consumer electronics needs a creativity to market their products. Anyways I've never seen anyone using a tablet around me. Everyone is just sticking to their laptops or the older desktops.The comaprision of existing tablets is still missing interms of scientific way but every OEM's is bringing out a new Tablet everyday. Too crowded as you said Bolaji.

  6. saranyatil
    January 20, 2011

    According to the recent projections Apple will stay as a giant in the tablet market at least for now. with Ipad 2 releasing in Feb should see what are the changes going to take place in the market, it would favour Apple or may be the way round too so we need to wait for sometime to understand who will sustain as a lead in tablets.

  7. tender vittles
    January 20, 2011

    I often wonder what the market would do if there was no Apple. This is a market segment that was all but written off by many in the industry. Along comes the iPad and now there is a littany of “me too” products out there all trying to dethrone the iPad.

    The other guys need to learn that great design will ALWAYS attract customers. In that area Apple stands alone. They understand the power of bringing technology together with elegant industrial design to create a new market segment. And oh yeah they expend the R&D funds to make it happen.

    Before the iPad released there were the industry experts wondering why anyone would buy one. Would Apple be able to sell the iPads? Would they be successful? Now they all act as if they saw the success of the iPad and all its imitators as an obvious progression in the market place. Chameleons all of them…..turning whatever color they need to with whomever reads their dribble.

    Wake up folks it's the design and clever market shaping.  

  8. Hardcore
    January 22, 2011

    I have the feeling the market will split into two main areas:

    Area One: 

    With the likes of Apple and other supplier making product that has higher price,longer battery life and longer product life, possibly one-two years befor the buyer considers purchasing a new  tablet device.

     

    Area Two:

    Product at the low end of the market, specifically targeted as entry point devices for people on a lower budget. I was Speaking to a manufacturer in China Recently, and they are currently designing new products on a 3 month turn around, that is to say from inception to first shipment is roundabout 3 months. 

    They were saying that the market life for a product in Southern China is currently about six months , before they have to start making drastic price decreases in order to clear stock.

    So really there is not a lot of time for these entry level guys to get the next product ready for the market, if htey are to stay in business, the interesting point of this will be, what happens when you can no longer innovate a product beyond a certain point?

    There is only so much functionality you can add to such a device,even bigger/smaller screen-size has a limited range, Too big and you are a laptop, too small and you are into the realms of PDA's and mobile phones.

    One mitigating factor of the 'area Two' and some players in  'Area One' is the 'theft' of GPL material , since many of these devices run Android on top of 'Linux' the players in this market are legally bound to release the source code for the devices, if they are to remain inside of the strict European/American Copy right laws. 

    However if you look around, this GPL material is currently in short supply, that is to say that most of these players are opening themselves up to litigation in Europe and the states , maybe a mischief making copmany wanting to hold ont its market share could start instigating copyright cases in order to 'retard' a competitor encroachment into their market.

     

     

     

  9. seel225
    January 31, 2011

    From the last few years, there has been lot of advancement in the Tablet market. Even though there are many players in the market, still apple is winning the race. There has been a huge competition from other companies such as RIM, Samasung, Motorola and etc. I hope in near future apple will design the ipads in a way, where they can be used a regualr laptop.

     

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