What the Tablet Market isn’t

The common narrative on tablets is that they are replacing PCs. Tablets indeed look like a typical “low-end disruption” as discussed in “The Innovator’s Dilemma” by Clayton Christensen. “Low-end disruption” frequently involves products that are less powerful then the mainstream but simpler to use. Price is often cheaper as well.

Tablets fit this description almost perfectly. They are not as powerful as PCs and are difficult to use for many of the complicated tasks that power users regularly perform. On the other hand, they are inexpensive and easy to use. Even kindergarten children can use them quite effectively.

Looking at shipment data from places like Garner and IDC, it seems clear that tablets are replacing PCs as the former sales rise and the later sales are tanking.

The story however, is not so simple. If you take a look under the hood, as Ben Bajarin has been doing in his excellent Techpinions website, there is data that does not fit a “low-end disruption” trajectory.

Here, I would like to take a look at his article “The State of Tablets in 2013” ( It is behind a paywall, but if you frequently search the web for tech information, then the price is well worth it. A lot of the information that you get cannot be found on the “free” web. )

In this article, Ben Bajarin give us some interesting data points;

  1. The vast majority of tablet sales are to existing PC owners.
  2. People who bought “cheap” tablets have buyers’ remorse and intend to spend more on their next purchase.
  3. The majority of “branded” Android tablets are being sold by Samsung. Nexus 7 (Asus) sales are weak. Amazon Kindles are only selling well during the holidays. Samsung tablet sales may be mainly due to these being offered cheaply or as a gift together with a purchase of a Samsung smartphone.
  4. A lot of the cheap tablets aren’t being used. Even usage statistics for the “branded” tablets from Samsung are disproportionately low.

Compare the situation with what we would normally expect from a “low-end disruption”;

  1. “Low-end disruption” succeeds when the pre-existing product is too powerful, and a less powerful product would satisfy most customers’ needs. The “low-end” product enables those who would otherwise have been non-consumers to make a purchase, thereby increasing the addressable market. These non-consumers would be satisfied with their purchase because the alternative would be no purchase at all. Since tablets are selling to existing PC owners, and they seem to regret their purchase, this does not seem to be the case. (iPad users seem to be satisfied with their purchase, so iPads actually qualify in this aspect.)
  2. “Low-end disruption” products should be cheaper than pre-existing products. However, low prices should be attained by virtue of the product being simpler to produce and support. They should not be cheap because the vendor is willing to reduce margins, or to lose money. That is not a “low-end disruption” but instead it simply is a price war; a vain attempt to gain market-share in a strategic market. (iPads have a reasonable margin, so they uniquely qualify here again.)
  3. “Low-end disruption” products subsequently improve in quality, performance and features so that they can more fully replace the pre-existing product. If innovation is simply being used to lower prices rather than improve capabilities, then the disruption will not work its way up the ladder.

I see the current situation more resembling a “new market disruption”. In a “new market disruption”, the new product fits a market that is not being served by pre-existing products. Ben Bajarin’s report in combination with other reports I have seen, seem to indicate the following market.

  1. The market for kids’ computers.
  2. The market for portable video players, which importantly are capable of playing pirated content.
  3. The market for computers that you want to use on the sofa or in bed or standing up.

You may well ask, “well what’s the difference between a low-end disruption and a new-market disruption”. My answer is that if tablets are a “low-end disruption” of PCs, then we can predict that the market (counted in units) will be larger than that of current PCs. On the other hand, if it is a “new-market disruption”, then we can’t accurately predict the size of the market. It may be much smaller.

Let’s take a look at the adoption curve of tablets to see if it the growth trajectory can give us a clue about the potential market size. We’ll first look at web usage statistics from StatCounter.

StatCounter comparison US quarterly 20121 20141

In my eyes, the growth trajectory of tablet Internet usage is extremely gradual. This is also mirrored in other statistics. Horace Dediu of Asymco attributes the slowing tablet growth to the lack of new iPad introductions. I am however unconvinced. I think there is a strong possibility that the addressable market of the current tablets is actually quite small.

Just to clarify, when we are talking about tablet sales, we have to be careful to exclude the tablets that are being sold and used as portable video players. Most of the unbranded Android tablets that are unactivated are likely to be in this category. It is also likely that a significant portion of branded Android tablets are included, although it is difficult to determine how many. For example, Panasonic, a huge Japanese consumer electronics company is selling a “Home Smartphone VS-HSP200S” which is actually a 7-inch tablet-ish device running Android 2.3 and which is WiFi only but connects to Google Play. It is mainly marketed as a Skype and electronic Fax machine as is evident from the product name. Also Toshiba in Japan is selling their tablets under the REGZA brand (their TV brand), not their Dynabook (laptop) brand.

So what I sense is the possibility that tablets (as computing devices) may have hit a roadblock in adoption, and this is due to the potential market being actually much smaller than envisioned. Much smaller than the PC market.

If this is the case, then what should be done about it? Or even, is it worth trying? Are we trying to artificially enlarge a market that is actually rather small?

These are questions that may be answered in the next iteration of iPads from Apple. Remember that “low-end disruptions” are at first not very capable, but they eventually move up-market through innovations that enable them to compete with high-end products but retain their simplicity. I strongly doubt that huge tablets or 2-in-1s qualify as this kind of innovation. Apple (and most likely only Apple) may have the answer in one of its labs.