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Are Things Getting Sour for Apple in the Tablet Space?
Posted by: Analyse360Degree (IP Logged)
Date: May 3, 2014 01:16PM

On Thursday, International Data Corporation (IDC) came out with its 2014 First Quarter Worldwide Quarterly Tablet Tracker and shed some light on the ongoing trends in the global tablet market. The figures reported by the data giant, though not very encouraging, were strong enough to bring smile on the faces of some tablet manufacturers, but Apple (AAPL), forcing us to think if this particular consumer electronic space is getting sour for the tech giant. Let’s take a look at what’s going on.

1Q14 Figures Suggest Sluggish Growth

During the first quarter of 2014, global tablet shipments reached 50.4 million units, up from 48.6 million units of the prior year period, translating into a decent 3.9% jump. But, this also denotes a sequential drop of 35.7% compared to the fourth quarter of 2013, primarily because the shipments of the previous quarter were pushed up greatly by the consumer spending habits during the holiday season.

Despite the 3.9% increase in quarterly shipments, industry experts and analysts are not happy and they feel the growth momentum of the space is gradually slowing down. The major reason for the loss of pace is the growth in the large-screen smartphones. Consumers are increasingly opting for smartphones with screen sizes above 5 inches as they feel that’s a better substitute of tablets, being easier to carry. Even the consumer spending nature is changing as more and more people are holding on to their existing tablets for a time period longer than estimated. As a result of this repeat sales is going down, automatically pulling down the momentum.

Samsung and Lenovo’s Joy, Apple’s Worry
Though the global tablet market is not in the best of its health, some players have been able to report fantastic numbers resulting in more worries for the iPad maker. While the Cupertino giant continued to rule the segment, it lost a substantial chunk of its market to the South Korean giant Samsung (SSNLF), who seems to be picking up pace. Apple shipped a total of 16.4 million iPads during the period, resulting in a drop of 16.1% year-on-year (YoY). With this drop, Apple’s market share also dropped YoY from 40.2% to just 32.5%.

In contrast Samsung had a superb time, reporting a YoY growth of 32.0%, as its shipments increased from 8.5 million to 11.2 million in a years time. However, the most impressive growth was displayed by the fast growing Chinese manufacturer Lenovo (LNVGY). The company reported a stupendous growth of 224.3% in tablet shipments and presently accounts for 4.1% of the global tablet market, up from 1.3% in 1Q13. Lenovo has been taking its devices very seriously and seems to be hell-bent on making a mark on the space, clearly understood from its acquisition of Google (GOOG) owned Motorola.

Departing Thoughts

It’s clear that both Samsung and Lenovo are eating into Apple’s market share thanks to their low-cost attractive offerings. As the tablet market grows, new layers of buyers are entering the space that are highly price-sensitive and seek value-for-money. Both Samsung and Lenovo are able to capitalize greatly on this opportunity. Apple is getting restricted because of its target market where the demand is brand-driven. The iPad maker’s market is slowly getting saturated as lower proportions of new-to- tablet buyers are opting for iPads, old iPad users are holding on to their devices, and shift from Android to iOS is becoming slack.

Putting it simply, Lenovo and Samsung are diluting the tablet market with their affordable offerings and causing pain to Apple. Presently the company is the leader in the tablet market, just like it used to be at one point of time in smartphones. But, stronger marketing and low-cost offerings from peers snatched away the throne from Apple. The current concerns of analysts are on the possibility of the same thing happening for tablets. May be it’s time for Apple to introduce to the market another new gadget, helping in bringing back the game in to its forte.

Stocks Discussed: AAPL, GOOG, SSNLF, LNVGY,
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