The U.K. anchor branch of Deloitte, the professional audit, consulting, financial advisory, risk management, and tax services firm, has posted its 13th annual Technology, Media & Telecommunications (TMT) Predictions white paper, presenting the company’ perspective on major trends that will impact businesses in 2014. Deloitte’s predictions are based on hundreds of conversations with industry executives,”and tens of thousands of online interviews with members of the public around the world.
One of Deloitte’s 2014 predictions (or observations) is that the tablet computer market is, after the passage of just four years since Steve Jobs set a revolution in motion with the original iPad release, is becoming mature and will “stratify,” with 8.5 inch or smaller screen machines becoming the the predominant tablet panel size. They note that the surge in compact tablet sales is driving at this stratification of the tablet base, similar but more profound than what has been experienced in the smartphone market over the last two years. Aside from screen size, Deloitte observes that tablets are also diversifying by weight, processor speed, memory capacity and price.
Deloitte’s analysts say that by the end of Q1 2014, the compact tablet base will hit 165 million units, surpassing the projected “classic” +/- 10-inch tablet base of 160 million, observing that relative panel size has profound effect on usability of content, with a 10-inch screen having 50 percent greater usable area than an 8-inch unit, which in turn may have double the area of a 7-inch panel, given similar aspect ratios. They note that most Web pages, typically optimized for viewing on PC displays, also reproduce well on c.10-inch screens, but may be difficult to read on an 8-inch panel and even more challenging on a 7-incher, especially for pages that involve filling out forms and for viewing video.
Screen size is also a determining factor in tablet weight, with the current installed base of 10-inch tablets running about one-third heavier than 8-inch tablets, and about double the weight of 7-inchers. However it should be noted that the current 9.7-inch iPad Air is a classic panel size tablet that has still reduced compact tablets’ lighter weight advantage significantly.
Deloitte says aside from their lower weight and trimmer dimensions making them easier to pack and handhold, prices are a substantial driver behind compact tablets’ numerical popularity. They note that a growing range of tablet sizes reflects a more diverse tablet user demographic, and while early iPad adopters tended to be relatively prosperous and able to afford a $500-plus tablet in addition to a laptop computer, there has been a demographic shift among the more recent tablet-buying cohort, a greater proportion of whom are less well off and will be replacing an existing device category with a tablet purchase. These less-well-off — often younger — users will also be less likely to participate in online commerce and purchase apps, either because of relative scarcity of funds or lower levels of tech literacy or both. Consequently, Deloitte expects tablet platform generated advertising revenues to diminish with the trend to smaller tablets.
Another element of a maturing tablet market is a greater likelihood of tablet users owning more than one tablet, Deloitte noting that in developed markets, more than 20 percent of tablet owners have more than one — often in different size categories, or one for home/personal use and one for business.
Deloitte observes that with tablets having grown in popularity with such extraordinary speed, manufacturers will be obliged to work hard to stay on top of the evolution curve. They say that getting the right combination of form, function, and price right will remain a moving target in 2014, and that the surge toward smaller tablets could lead to reduced profitability margins for established tablet vendors. Another tablet prediction for 2014: ruggedized tablets selling in the $250 range.
The Deloitte bottom-line is that while some, perhaps younger, users may have lower expectations and greater tolerance for the pixelated video and poorly-rendered screen content inherent to cheaper tablets’ lower resolution displays, for many consumers, buying a lower priced tablet will prove a false economy.
Of course, as is typical, these general observations apply somewhat differently with regard to Apple products. For example, over the 2013 Christmas season, Apple’s iPad sales bucked the trend for smaller, less expensive tablets to dominate.
A Consumer Intelligence Research Partners (CIRP) study found that the still-offered iPad 2, originally released in early 2011, now represents just five percent of 16 GB capacity iPad sales. Not surprising, considering that the vastly more powerful and capable iPad Air costs only $100 (25 percent) more, and represents a much better value looking forward. It’s questionable whether iOS 8 will support A5 chip devices like the iPad 2 and original iPad mini.
Atypically, however, going smaller with an iPad no longer necessarily means taking a substantial hit in performance and display resolution. The second-generation iPad mini now comes with a high-resolution Retina Display, and uses an A7 system-on-chip that’s only marginally slower than the A7s used in the iPad Air.
I’m also not surprised that the iPad Air is outselling the iPad mini, since the Air’s trimmed-down form factor has closed the gap on the mini’s only real advantage other than price.
CIRP’s researchers found that the full-size iPad Air and leftover fourth-generation full-size Retina iPads accounted for 59 percent of iPad sales over the recent holiday season, while the the non-Retina A5 powered iPad’s mini was the second best-selling iPad model, accounting for 25 percent of sales, with the new A7 powered Retina mini taking 16 percent and the iPad 2 bringing up the rear at five percent. I am surprised at the robustness of non-Retina mini sales, presumably based purely on price, likewise $100 less than the current model since the mini 2 is a much better value for reasons outlined above regarding the iPad 2, with which it shares A5 silicon.
Overall, however, CIRP Partner and co-founder Mike Levin is cited by Mac News Network noting that “Apple managed to shift significant sales to its higher-priced models,” adding that, “for the past year, the legacy iPad 2 grabbed from one-quarter to one-third of iPad sales.
“Along with the trend toward sale of models with larger storage capacities, Apple should see higher iPad average selling prices, with iPad 2 at only 5% of total sales and iPad mini sales split between the original model and the new iPad mini with Retina display.”