Tablets To Account For 50 Percent Of PC Market In 2014 – Canalys

Tablet sales will account for half of the entire PC market in 2014 as demand for devices from firms such as Samsung and Apple continues to grow, according to new data from market research firm Canalys.

The firm says that with sales of tablets having reached 40 percent in Q3 2013, it now predicts 50 percent of PC-style devices sold will be tablets by the end of 2014 reaching 285 million. Desktop units will be 17 percent of the market, with sales of 98 million. Notebooks will account for the remaining 33 percent, at 192 million sales, Canalys estimates.

Apple and Samsung will remain the dominant vendors over the next few years, with Canalys senior analyst Tim Coulling saying the tablet market is an area Apple especially will continue to push as it brings the firm such good margins.

“Apple’s prioritisation of protecting gross margins will see its PC market share continue to decline,” Coulling notes. “However, Apple is one of the few companies making money from the tablet boom. Premium products attract high-value consumers; for Apple, remaining highly profitable and driving revenue from its entire ecosystem is of greater importance than market share statistics.”

Meanwhile Microsoft is set to improve its position, although only relatively to its current lowly status in the market. Canalys predicts Microsoft’s share will grow from two percent to five percent in 2014, driven in part by its deal for Nokia, according to research analyst Pin-Chen Tang. “2014 will see another major shift for the company as the Nokia acquisition brings it a step closer to being a fully fledged smart mobile device vendor,” Tang predicts. “As a vendor Microsoft needs to prove to channel partners and consumers that it is in this market for the long haul. Balancing the competition with its vendor partners and embracing a ‘challenger’ rather than an ‘incumbent’ mentality is essential.”

Tang adds that Microsoft must address the issues caused by having several variations of its operating systems in the market, and that a critical first step is to address the coexistence of Windows Phone and Windows RT, noting that having three different operating systems to address the smart device landscape is confusing to both developers and consumers alike.

To underline the growing demand for tablets, Canalys predicts that by 2017, 396 million units will be sold, as the form factor continues to prove highly enticing for both consumers and business users.

Following the latest quarterly release of its worldwide, country-level forecasts Canalys predicts that next year tablets will almost out ship all other PC form factors combined, forming almost 50% of the total client PC market (desktops, notebooks, and tablets). The worldwide client PC market grew 18% in Q3 2013, despite desktop and notebook shipments continuing to decline. Tablet PC shipments accounted for 40% of PC shipments in Q3 2013, less than half a million units behind global notebook shipments. Tablet domination is set to continue, with Canalys forecasting 285 million units to ship in 2014, growing to 396 million units in 2017. Apple and Samsung are expected stay ahead of their competitors in the medium term, but there could be challenges for both vendors as competition in the tablet market continues to heat up.

“Apple has maintained its top vendor position throughout 2013, and the launch of the iPad Air and new iPad mini will strengthen that position in Q4. Its desktop and notebook business has remained stable while other vendors have seen their shipments deteriorate. Apple’s prioritization of protecting gross margins will see its PC market share continue to decline. Apple’s decline in PC market share is unavoidable when considering its business model. Samsung narrowly took the lead in EMEA this quarter and Apple will lose its position to competitors in more markets in the future,” says Canalys Senior Analyst Tim Coulling. “However, Apple is one of the few companies making money from the tablet boom. Premium products attract high value consumers; for Apple, remaining highly profitable and driving revenue from its entire ecosystem is of greater importance than market share statistics.”

Canalys forecasts that Microsoft will take 5% of the tablet PC market in 2014, up from just 2% in 2012. “2014 will see another major shift for the company as the Nokia acquisition brings it a step closer to being a fully-fledged smart mobile device vendor. As a vendor Microsoft needs to prove to channel partners and consumers that it is in this market for the long haul. Balancing the competition with its vendor partners and embracing a challenger rather than an incumbent mentality is essential. To improve its position it must drive app development and better utilize other relevant parts of its business to round out its mobile device ecosystem,” says Pin Chen Tang. “A critical first step is to address the coexistence of Windows Phone and Windows RT. Having three different operating systems to address the smart device landscape is confusing to both developers and consumers alike.”

Android-derived operating systems will be responsible for driving growth in the market and are forecast to take 65% share in 2014 with 185 million units. Samsung continues to lead with strong year-on-year growth coming from its broad tablet portfolio, and in Q3 2013 it had a 27% share of Android tablet shipments. But with hundreds of small-to-micro brand vendors in established and high-growth markets and international players such as Acer, Asus, Lenovo, and HP, this market share statistic will also start to decline. With the cost and time-to-market advantages afforded by their Chinese supply chain, these small-to-micro brand vendors are eating up tablet market share. Vendors such as Nextbook in the United States, and Onda and Teclast in the Peoples Republic of China ship more units than some of the major international top tier vendors in their home countries. The rise of small-to-micro brand vendors has proved that there is a demand in for entry-level Android tablets in every country and in every region, commented Shanghai-based Analyst James Wang. Vendors such as Acer, Asus, HP, and Lenovo have all entered the price war, with entry-level products at sub-U$150 price points. With vastly different cost structures these vendors will continue to find it extremely challenging to keep pace with local competitors, especially in APAC and Latin America. The tablet market has already started to see casualties, with BlackBerry exiting the market, and Barnes and Noble looking to adjust its business model away from its own independent hardware. Expect 2014 to bring a flurry of acquisitions, mergers, and failures as PC hardware vendors of all sizes struggle to maintain their desktop and notebook business while attempting to capitalize on a tablet market that will see great volumes driving limited value.

Note: Canalys defines a client PC as a computing device designed to be operated by an individual and positioned to serve a broad range of purposes, achieved by running third-party applications, some of which can work independently of a network connection. When designed to be portable, it must be able to function without mains power and have a built-in diagonal display size of at least 7 inches.

For more information, visit:
http://www.canalys.com/