iPad Revival?

Apple reported its 2017Q2 (Q3 by Apple's calendar) results yesterday, and many analysts were surprised by the very strong iPad sales which were 14% YoY by shipments.

However, this was pretty close to a prediction that I had made in December last year, even before the new, cheaper iPad and the 10.5 inch iPad Pro had been announced. I had said

Since 2017 is still the early phase of “productivity” segment adoption, it might yet be a bit early to see a strong impact in 2017Q1 and Q2. However, I do expect 2017Q3 to show a significant effect. 2017Q4 will be less impressive due to the “entertainment” segment dominating during the holiday season.

This is very much in line with the results that were announced, although the positive results came in a quarter early, most likely due to the cheaper iPad which I did not know of when I made the prediction.

As for reasons behind the sales increase, Apple put enterprise sales first and education sales second. Although they did not give any quantitative contribution data from each market segment, this aligns with my prediction that the revival of sales will be "productivity" driven.

With this successful prediction under my belt, I am quite confident giving predictions for the next two quarters. 2017Q3 will also be very strong YoY with growth possibly in the 20% range. Again, "productivity" will be what drives the growth. As for 2017Q4, there will still likely be good growth but not as significant as the preceding two quarters. I expect single digit or low double digit growth for this quarter. This is driven by the large "entertainment" iPad sales during the holidays, which I expect are still decreasing YoY and which will dampen the growth from the "productivity" sector.

Overall, my thesis that we are witnessing a long term revival of the iPad has been strongly enforced. Some analysts seem to think that the strong sales for this quarter are a one-time effect due to the introduction of the lower cost iPad. However, I expect strong growth to continue, proving these explanations to be false.

  • obarthelemy

    What surprises me is not so much that iPad has gotten cheaper, but that Android hasn’t. Actually, the Lenovo Yoga Tabs I’m partial to are getting more expensive, same as the Samsung Galaxies on the phone side.
    10″ iPad prices used to start at Android’s upper range, the new iPad is positioned at the mid-range. There are still reasons to prefer Android (ample storage, no OEM lock-in, Lenovo Yoga Tab format, widgets, HDMI+USB+µSD…), but it’s no longer the straight “this Android has the same specs as the iPad for half the price, plus an SD slot” that it used to be.
    I’m curious if the sales are replacements of the very large overhang of old iPads, or new customers. Do you have a source for tablet web traffic ? I couldn’t find tablets specifically, just general Mobile.

    • naofumi

      I’m not particularly knowledgeable about Android tablets, but my sense is that everybody is being distracted by the Microsoft Surface. This includes many Apple fans as well. The mistake in my opinion is to think that tablets and PCs need to converge, and that a detachable keyboard form factor was what was going to help. This causes high-end designs to be more in line with the Surface and more expensive. Even the new iPad Pro is more of a distraction than a significant growth driver, in my opinion. The original iPad form factor was more or less perfected on arrival, and the vast majority of significant mass-market advances will be in software.

      I do miss cheap Android tablets. I wish I had one to play with. I think that the reason is the market is not growing and hence profits are more important than market share. Vendors are not willing to forego profits to gain share.

    • I’m not particularly knowledgeable about Android tablets, but my sense is that everybody is being distracted by the Microsoft Surface. This includes many Apple fans as well. The mistake in my opinion is to think that tablets and PCs need to converge, and that a detachable keyboard form factor was what was going to help. This causes high-end designs to be more in line with the Surface and more expensive. Even the new iPad Pro is more of a distraction than a significant growth driver, in my opinion. The original iPad form factor was more or less perfected on arrival, and the vast majority of significant mass-market advances will be in software.

      I do miss cheap Android tablets. I wish I had one to play with. I think that the reason is the market is not growing and hence profits are more important than market share. Vendors are not willing to forego profits to gain share.

      Regarding web traffic statistics, I’m more wary of them now in regards to mobile devices. The significance of web usage as opposed to app usage is just too low right now to justify the use of web stats as a proxy of anything.

      The next few quarters will give a more definite indication of whether we are just seeing a overhang of replacements. If this is the majority factor, then the holiday quarter will be a huge improvement YoY. However, my expectation is that although the holiday quarter will be stronger than recent years, non-holiday quarters are where we will see much stronger YoY growth. I think we are trending away from tablets as being merely entertainment devices and more into productivity. Hence less emphasis on the holidays.

      • obarthelemy

        re. Convergence, it might make sense if there are 0 trade-offs, which MS is aiming for with their dual-UI setup. If apps ever appear, the Metro UX is currently unpolished, but there’s no theoretical reason why it can’t become as good as Android/iOS, and the hardware is more than enough for 90% of users. This would save money and headaches ( a single machine to admin, charge, carry); I actually do something similar with the dual Android+Win10 tablet that has replaced my netbook. I’m not sure the cost can become competitive though especially since docks are still proprietary.

        As for a cheap Android, I bought a Lenovo Tab 3 10″ (not a Yoga, a good’ol slab) in an emergency for $130-ish, it’s OK for media/web/social/simple games, I wouldn’t want to do 3D or pics/video editing on it. Office stuff is OK. It takes forever to boot up, after that it isn’t too sluggish, though web pages load far from instantly (1.4Ghz SoC…).

        I’d argue the cheap iPad is for entertainment, if you want to do productivity Apple wants you to buy the Pros. The sliding ASP seems to mean the non-Pros are more successful.

        • I have trouble with the argument that the Pro is for productivity while the cheaper iPad is for entertainment. Look at PCs for example, and think who are buying the more expensive and powerful models. Of course there are some video professionals using the most powerful machines, but I’d bet that the majority of high-end PCs are used for gaming (entertainment). On the other hand, mobile professionals are given cheap, flimsy laptops from Lenovo. Same with smartphones. My company gives me a 16G iPhone 6, and not a 256G iPhone 7. I would totally expect that corporate deployments of iPads would mostly consist not of the iPad Pro, but of the cheaper models.

          Therefore, although I agree that the majority of increased volume in the current quarter is due to the cheaper models, that does not mean that they are being used for entertainment. In fact it could very much be the opposite, although we have no data to support either argument.

          Corporations are really cheap when it comes to IT hardware purchases. The keyboards, monitors, and mice that they give you are awful, and it’s depressing how they skimp on what their workers will be staring and pounding on for hours each day. I fully expect them to purchase the cheapest iPads they can get.

          • obarthelemy

            You’re right, Home users mostly won’t be buying the Pro, but Pro users will be buying the Non-Pro.