Apple Should Toast Tablets This Holiday Season
Tablets will see huge demand this holiday season with Apple (NASDAQ:AAPL) continuing to reign the tablet market and Amazon (NASDAQ:AMZN) poised to take over from Samsung as the new No. 2 according to a survey conducted by market research firm, ChangeWave. The survey results show that demand for media tablets has almost tripled as compared to the same period last year and Apple will stand to gain the most from this increased demand. However, unlike last year, Amazon’s Kindle Fire, which was recently launched at a very attractive price of $199 will be giving the market leader a fair amount of competition in a market that has until now seen little competition for the iPad. While good for the industry, the Fire may however spell doom for its non-iPad rivals such as Samsung, HTC, Motorola (NASDAQ:MMI), Research In Motion (NASDAQ:RIMM) that so far have posed little to no challenge to Apple’s might.
The survey showed that almost 65% of the holiday shoppers would buy the iPad while 22% were eying the Kindle Fire. Samsung’s Galaxy Tab received interest from only 4% of the respondents and none of the other competitors managed more than a dismal 1%.
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iPad sales to remain strong despite Fire
We estimate that Apple will sell about 39 million iPads this year and about 120 million in 2015. According to Gartner’s most recent estimates, 64 million tablets will be sold this year and by 2015, almost 326 million tablet sales are estimated. [1] If we consider 65% to be a long-term market share average for iPad, Apple should sell more than 200 million iPads in 2015. However, we don’t think Apple will be able to defend such a high market share in the long-term. Apple’s tablet market share has reduced from over 90% in 2010 to less than 70% now. Emerging competition from Android based rivals such as Kindle Fire will take some market share away but the iPad will continue to grow at a good rate as tablets see mass adoption.
iPad pricing may come down
While Android-based tablets face the biggest threat from Kindle Fire, Apple will eventually start to feel the effects of a much lower-priced competitor. The Kindle Fire is a 7-inch tablet and we do not think any 7-inch tablet can pose the iPad serious threat, at least not in the near-term, owing to certain design issues we had discussed earlier. (see Do 7-Inch Tablets Stand a Chance?)
However, it will attract a more price sensitive demographic with its offering and as the tablet market matures, it may start to give Apple a few reasons to rethink its pricing structure beyond the customary reduction in prices of the older versions as newer versions are rolled out. This will undoubtedly serve the industry’s best interests by bringing down overall prices.
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