Apple’s Tablet Competitors Will Never Catch Up

| Hidden Dimensions

“Hence that general is skilful in attack whose opponent does not know what to defend; and he is skilful in defense whose opponent does not know what to attack.” — Sun Tzu

It’s time to admit it. Despite all the forecasts and best hopes for the competition carving out a stake in the tablet market, success isn’t happening. And it isn’t going to happen. Apple owns this market, and the best the competition can hope for is crumbs.

Apple has an unsurmountable lead in the tablet market, and it’s going to stay that way.

Forever.

iPad 2

This is a bold assertion, but it can be backed up by looking at all the key elements that come into play and discarding wishful thinking.

First, there seems to be a common perception that in this ever growing tablet market natural things will happen. That is, as the market for tablets grows to several hundred million or more a year, Apple’s competitors will get smarter and successfully dilute Apple’s market share by virtue of the sheer number of competitors.

That’s baloney, and here’s why. The iPad isn’t a device that’s easily built and marketed. It requires huge infrastructure both in terms of software technology, products, services and supporting data centers. If you throw together the parts for a tablet, slap an Android OS on it and boast about Adobe Flash, you’re in for a disaster.

On the other hand, the iPad is more than the sum of its parts, a design principle that Mr. Jobs has mastered.

Second, the mentality of the competitors is all wrong. They’re using the military philosophy of “You fight with what you have.” In this decade, the key is conjuring up something you don’t have to compete with. That takes money and talent. Executives who are accustomed to skimping on engineering talent and computing resources are unable to create, out of nothing, the software needed to compete in this era. Worse, how do you design and build the next generation technologies with Windows or Linux? As Apple jumps to warp speed, the company’s parting message to the PC world is: You’re living with tools from the past and trying to create the future with them — but you can’t.

Out of time

“Out of Time” by Abraham Imola

Third, Apple is strategically grabbing all the component parts the world can manufacture thanks to the cash it has on hand. Whenever a new company springs up to meet demand, Apple jumps in and locks up contracts with them as well. It’s a Catch-22. Suppliers know that Apple has the money, so they can’t wait to work with Apple. Other tablet makers fall behind. With less cash to play with, the competition can’t ever get to the head of the line. It’s a vicious circle of failure for others that Apple has erected.

pullquoteIf Apple were a puny company, such as it was in 2000, it might be easy to out spend and outmaneuver Apple. But now, Apple is a giant and flexing its muscle. It’s not easy to ride roughshod over a hundred billion dollar company. Moreover, once customers start to use Apple equipment, it’s very hard to lure them away. For a customer to forsake an iPad and all its apps and convenience requires that they be presented with an overwhelmingly better proposition by the competition. So far, the competition can’t even come close to equalling the product line, retail availability and customer experience Apple offers. So good luck with that.

Here’s an estimate of 2012 tablet sales by Maynard Um at UBS, published on 27 July. Some of these companies, realizing that tablets are the future, will stir up the courage to compete vigorously and blow a lot of money, likely in vain. Others will realize that they’re not cut out for that business and try to find another more profitable line of business. I expect this list of companies building tablets to be half this size by Q1 2013. (For more on this, see Bryan Chaffin’s excellent analysis and charts.)

 

Est. 2012 Tablet sales

Estimated 2012 Tablet Sales. Credit: UBS

Finally, we should recall that after Windows 95 came on the scene, it just about did Apple in. Apple has fought Windows ever since then, about 16 years and never has been able to gain more than single digit market share against Windows. The combined might of all of Apple’s talent, Mr. Steve Jobs, and his capable executive team, have made headway, but never seriously threatened Windows.

So we have a precedent. If you get out ahead, maneuver well, and stay out of trouble with the DOJ, there’s no law of physics that says you’re bound to fall down the ladder of market share. (Apple’s iPod series proved that.) Winning doesn’t come naturally in the tablet market, and time is not the competition’s friend.

Apple has made the assertion that all the things everyday people need to do can be done on an iPad. With each iOS upgrade, that simple fact is being communicated increasingly well to customers. PC sales are being cannibalized. Hell, even Apple’s own Macs are being cannibalized — or the Mac’s rate of growth would be even higher.

Not only is the PC in decline, but the tablet market, measurable by the hundreds of millions in the next few years, will be dominated by Apple. That’s the way it’s going to be, and Apple’s tablet competitors have to decide if they want to get out of the game, spend billions fighting for crumbs, or try to change the rules. These are not savory options, and they’re all summed up by the lead-in quote by Sun Tzu.

This is the reality, and it just can’t be brushed under the rug any longer.

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Comments

Lee Dronick

Some very good points!

geoduck

In principle I agree with you. However, the words of a coach I knew years ago keep coming to mind:

“The moment you think you have won, you’ve lost. Until the final buzzer, play like you’re always behind by one point.”

So while you are likely right, I hope to heck that nobody at Apple ever reads this.

Nemo

John:  While I think that your points are well taken, I caution that pride preceedth the fall.  Fortunately, I think that Jobs and his lieutenants take the view that they must earn their customers’ patronage everyday by providing them a superb and unparallelled user’s experience and by quickly making things right when things go wrong for any customer.  As long as, Apple is guided by that principle, I concur that the iPad’s prospects for staying on top are excellent.

And a word about Macs.  I think that Macs has finally made it into double digits, but the Mac’s market share belies its success.  Though Apple has respectable but hardly dominant share of the market for PCs, Macs generate revenues and profits greatly out of proportion to their share of the PC market, and I mean greatly.  Horace Diedu at Asymco has written comprehensively about this. 

Also, in some segments of the market for personal computers, Macs dominate.  In the market for portable computers costing more than a thousand dollars, Apple dominates.  Once again, Mr. Diedu and others can provide the numbers.  And among college students, the future executives and wealthy demographic of America, the Mac dominates.

So though Apple’s Macs have only about a ten percent share, they have the Lion’s share of PC revenue per share.  No pun intended.

But Apple is on top with iPad, and as the iPad substitutes for the PC, Apple should do even better.

other side

Apple has an unsurmountable lead in the (...) market, and it?s going to stay that way.

Forever.

IIRC, people said that in January 1984 as well.

SO long as Apple stays disciplined and focused on great product, they’ll earn success.  But if they get cocky and convinced of their own greatness (again), history just might repeat itself.

I like geoduck’s sports analogy.  No matter what the score currently is, you need to play a full game. smile

ibuck

I hope HP or someone pushes Apple a bit, so that Jobs and company keep new great products coming, whether they are considered tablets, like iPad, or something else (like iPhone & iPod Touch?or even super iPod Touch).

To do so, Apple’s devices will probably need greater speed, more sizes, and better or equal battery life, as well as better ease of use (a talk to it interface!), great new apps, and have problems easily & quickly resolved.

Apple’s got the dominant position now, but they must keep improving.

mrmwebmax

+

Great article (as always), John. And for those who worry about Apple getting cocky and losing its edge on competitors, remember: This is the new Apple. This is the Apple that came out with the iPod, and then the iPod Mini. People loved the iPod Mini and bought them by the bucketfull, making it the most popular MP3 player by a wide margin. So what did Apple do? They discontinued it, and launched the iPod nano. So just as competitors were maybe coming up with a challenger to the Mini, Jobs & Co. simply changed the rules of the game. I’ve no doubt they will do the same with tablets.

Neil Anderson

Sounds like Apple’s results are about to get padded.

danf

Been buying Macs for 20 years as a person who makes a living with computers.  I’ve become increasingly nervous about Apple’s indifference to everything except consumers.

Don’t plan to upgrade to lion.  The upgrade to snow leopard was painful enough.

Been looking at buying a new computer.  Not seeing anything from Apple that is compelling.  They take stuff away (optical drive) and leave the price the same.  You can’t spec out a new mac mini without being forced to far up the price curve.

Hate the keyboards and the glossy screens

For the first time I’m seriously looking at Dell with the intention of running linux for server work I used to use OSX for.  Certainly it will be harder, but don’t enjoy wondering what Apple will take away next

Good bye Apple

graxspoo

The tablet space is going to continue to grow and become more diverse. Apple will certainly dominate the ‘personal use/entertainment’ tablets for now, but because of the smaller size, lower price point and ease of administration, people can own several different tablet devices. For example, there are probably people out there right now that own an iPad a Kindle and an Android phone, which are all tablets of sorts. So, as the market matures there will be more niches to fill, and Apple certainly won’t fill all of them.

mhikl

Tis doubtful that Monsieur Jobs and company need any push by riffraff to keep blasting out great products. It?s in their blood, the soul of their existence, the purpose for getting up in the morning, the matter of their dreams. They are men who stay boys, believe in the impossible, straddle the divide where victories are won. Doubt in these characters is as practical as doubt that the sun won?t come up in the morning.

We are creatures that question with caution, doubt through our beards or at least strap worry to our backs as we begin our day, but such is not the way of the smart warrior. JM has sung his tune of the iPad before and it has become the itch that he has to scratch. Scratch on, John. Continue the charge.  It doesn?t take a crystal ball to see this portent of what?s to come but few have the courage to raise the rah as others raise but worry.

John Martellaro

danf: I respect that kind of decision.  I’ve thought like that myself from time to time about various companies and technologies.  But in the case of Apple, I respectfully submit that your decision reminds me of the fellow who left his wife because her taste in flowers for the garden drifted to the more expensive. Her choice had no tangible effect on what was important in the relationship.

I’ve seen a lot of people try this, and they quickly tire of the other side. As Mac users, we often forget how bad it can be out there.

Ask yourself if your life will be better with a Dell—our just different and likely even more annoying.

wab95

John:

Excellent post; love the Sun Tzu quote. If he were around today, he would laud SJ’s martial prowess in the marketplace.

An alternate analogy of what at least some of these CEOs appear to be doing with their tablet strategy is to build a modern, competitive health care infrastructure using leeches, blood-letting and arsenic. And they seem bemused by the fact that patients aren’t packing into their hospitals - must be the marketing. Then there are others who have built a stand-alone hospital, and kitted it with all the latest technology, and priced the services comparably to Apple’s (I know, Apple doesn’t build hospitals, humour me). Still, the wards are empty.

What’s wrong? For starters, Apple aren’t using 19th Century technology. Second, Apple aren’t playing to or for the here and now, but shepherding us toward the future (Where’s the USB port on the iPad? Who’s going to buy a smartphone lacking a keyboard?)

Third, and this is the heart of the matter (no pun intended with healthcare), Apple aren’t building hospitals, but a healthcare ‘system’ - again to use the analogy.

Apple are building a digital management system served by state of the art hardware and designed around, not just where the individual consumer is today, but where the consumer should be tomorrow - using the best Heisenberg uncertainty estimates modelling projections can provide. The iPad is just one component of that arsenal, complementing the iOS, OS X the iCloud and all the hardware that interface with them.

This is what the competition are up against. I take geoduck’s and Nemo’s points about pride, and underscore them. ‘Winning’ and ‘losing’ are reference frame - specific, and time plays havoc on the doings of men [gender independent].

At the same time, I wonder aloud if it is fair to contrast in too unkind a light the offerings of the excellent to those of true genius. Antonio Salieri was an accomplished composer who helped shape 18th Century opera; he just wasn’t Mozart.

Like Sun Tzu, Steve Jobs is a true genius, surrounded by the best and the brightest in his field. This is being said now, and history will confirm it. And future historians (I love how the past and future meet in present speculation) will determine if Apple are able take their ‘system’ itself into the future.

wab95

This is the new Apple. This is the Apple that came out with the iPod, and then the iPod Mini


Great point, mrmgraphics. To add, and this is the Apple that got its arse handed to it on a platter by MS in the PC wars. This Apple, comprised of the current senior leadership, have been bloodied in battle and know the bitter taste of defeat and have stared into the abyss of impending extinction (1997).

The concern is not for the current but future leadership of Apple. This is why we need a competitive field.

Ruhayat

Good arguments, John, but I think you are not seeing the big picture. Two things drove me to Macs way back in 1998: viruses, and Microsoft’s hubris. And that hubris thing is going to bite Apple in the ass, too, if they are not careful. Just as the fall of Rome was not because its opponents suddenly had superior weapons technology to it, Apple’s downfall may not be technological at all, but it might come from something far more basic - human emotion.

John Martellaro

Ruhayat.  I have written about the Big Picture extensively!  Just one example is item #5 here:

http://www.macobserver.com/tmo/article/the_five_problems_apple_faces/

geoduck

The trouble is that there’s a large grey area between aggressively pushing the technology and hubris. Was FinalCutPro-X due to wanting to make needed changes and start with a clean slate to push the envelope or arrogantly assuming that existing customers would go along with anything they shove out the door. It depends on your point of view. Where did dropping the floppy fall. Would that apply to dropping the optical drive too? How about glossy screens? I know a lot of people that HATE them, but you have to pay extra if you want a matte one. Lion makes major changes and there have been some significant issues (the issue with NAS systems is prompting me to delay upgrading). Is this a needed upgrade or hubris in replacing something that’s working just fine? What if I don’t want my Mac to be more iOS-like?

Sometimes hubris is in the eye of the beholder and it only becomes a problem when enough people see it. Trouble is that once a company becomes known as ‘arrogant’ it’s a really tough label to shake. Unfortunately I’m seeing hints of a change in public opinion. Where people laughed at ‘that crazy Apple’ dropping the floppy, and felt some satisfaction at them pushing the record labels around, now I feel like I’m seeing more anger at Apple pushing the industry in one way or another.

John Martellaro

geoduck: Apple has always been an agent of change.  Remember when Apple killed OpenDoc?

http://www.macobserver.com/tmo/article/my_first_encounter_with_steve_jobs/

I think that when Apple killed or aborted technologies in the past, like 64-bit Carbon, we perceived it as Apple smartly doing what Apple had to do to survive and flourish.

Now, when Apple is very big, we see the deprecation of the plastic, rotating disk as bullying by a Big Company.  But it’s just plain old Apple doing what they always do—relentlessly moving us into the future and farther away from the aging PC world.

Perhaps, only our perceptions have changed.

ibuck

geoduck said:  “now I feel like I?m seeing more anger at Apple pushing the industry in one way or another.”

This is possible, but have you factored in the current level of anger / frustration in the US? Maybe it’s the economy, or perhaps something else, but I’ve seen a lot of angry responses, particularly online, that are out of proportion to the events themselves. For example, SFGate.com recently cited the “trollish vilification of people”  in the comments here and here.

HUYA?

I have read that Apple is still run like a start-up despite being the second most valuable company in existence. They refuse to adopt the stifling mentalities that burden other companies. They move beyond past achievements, with an eye to the future. No sitting on their laurels for Apple!

geoduck

This is possible, but have you factored in the current level of anger / frustration in the US?

Perhaps, only our perceptions have changed.

Could be a little bit of both. Apple is now one of the ‘big boys’ so behaviour that is quirky and endearing in a ‘beleaguered’ company suddenly seems malevolent. Plus I agree people just seem more angry in general, especially in the US. It’s one of the reasons I left four years ago.

My concern is that if Apple gets a bad reputation it’ll be hard to shake.

wab95

but have you factored in the current level of anger / frustration in the US? Maybe it?s the economy, or perhaps something else


Insightful observations, ibuck. Not wishing to veer off topic, but simply to endorse those thoughts, let me parenthetically add that some posts both here and elsewhere (many of whose authors are not from the USA) are occasionally needlessly confrontational, and at times distasteful.

I would like to think that this is a communication style designed for the internet, where snark, biting wit, scathing cynicism and even overt boorishness are chic and rewarded with ‘likes’.  Not only are these a minority of the bloggers, but the bloggers themselves are a minority of the communities with which they identify (e.g. OS X users), and those communities a subset of the greater population. It is possible, hopefully highly probable, that these inordinately angry views are not representative of that greater population.

Yours links are a good reminder to not only keep things civil, but to hold and convey a level of respect for others that we would wish for ourselves.

Many thanks, ibuck.

John Martellaro

geoduck:

My concern is that if Apple gets a bad reputation it?ll be hard to shake.

Interesting. i read the other day that RIM has “lost control of its image.”
I need to go find that again for Particle Debris.

ibuck

John Martellaro quoted: I read…that RIM has ?lost control of its image.?

Maybe someone needs to adjust (and hold) the rabbit ears. </waggish remark>

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