RBC analyst Mike Abramsky believes that Google’s Android OS is going dominate the tablet market by 2014, though he defined “dominate” as Android having 40% market share by that time. The deciding factors, according to the analyst (who also covers Apple), will be innovation from Apple’s competitors and the appearance of cheap Android tablets from Asia.
“While Apple’s iPad may continue to set the bar high for experience, we expect Android to dominate (40% share Tablets by 2014), given its broader support from OEMs and carriers and expected budget-priced Android Tablets from Asia,” Mr. Abramsky wrote in a research note to clients obtained by Boy Genius Reports.
Innovation & Cheap Competitors?
This despite the fact that so far few Android tablets have shipped and those that have are markedly more expensive than Apple’s iPad line. While many and more Android devices were shown at CES, most of them haven’t yet shipped. Apple’s main competition in tablets so far has come from the $799 Xoom ($599ish in WiFi only), and the Galaxy Tab from Samsung, priced at $899.
Apple’s iPad line starts at $499 ($399 if you want the models that the Galaxy Tab and Xoom were designed to compete against in the first place), or $629 for a 3G model ($529 for the original iPad with 3G). Which is perhaps why Samsung said today that it wants to rethink its Galaxy Tab line to be more competitive with iPad 2.
This is the best Apple’s competitors have been able to turn out so far, and the so-called competition has defined Apple as the price-leader and chief innovator, not the other way around. This isn’t likely to change any time soon, either.
For one thing, Apple reportedly has 60% of the global supply of capacitive touch displays locked up in contract, and the company has similarly locked up supply of other critical components. This is a big part of how Apple has been able to crush it when it comes to price, and it’s not something that can easily be overcome by even large competitors (for instance, Samsung and Motorola), let alone smaller competitors. Apple’s buying power earns it the best prices, period.
For another thing, the entire smartphone, PC, and tablet industry is trying to copy Apple. Not one competitor has so far shown any bit of innovation at all. Almost all of the competing tablets we’ve seen look like iPads, and Google isn’t doing much of anything to differentiate its OS in terms of look and feel. Indeed, we have to look to Microsoft (of all companies) in the smartphone market to find any example of a company not trying to copy iOS, and Microsoft isn’t close to ready to try to bring a new OS to the tablet market.
With all of this reaction from Apple competitors, it’s hard (i.e. impossible) to imagine where the innovation Mr. Abramsky is predicting will come from.
Apps Matter More on Tablets
Another deciding factor in what we believe to be Apple’s continued dominance of the tablet market is the company’s huge lead in apps. It is our belief that apps matter more for tablets than they do for smartphones. Most folks need phones, and if you need a phone anyway, a smartphone makes the most sense for a lot of people. The ability to surf the Web, do Google searches, and get directions is the killer app of the smartphone.
Apps, on the other hand, are the icing on the cake for smartphones. Great games, Kindle apps, and Craiglist apps aren’t so much selling smartphones as they are making smartphone get more use. Apple’s iPhone has done well in the smartphone market because a lot of people like and appreciate that improved “more use” experience you get with Apple’s ecosystem. Android phones have taken the lead in unit sales because they are smartphones (i.e. surf the Web) and many are cheap.
Tablets, on the other hand, are all about the app. We don’t need a tablet, we want one, and we want one because it does a lot of things better than either a laptop or a smartphone (to borrow from Steve Jobs). Those things are defined by apps — if a tablet doesn’t have apps, the ability to surf on the couch without a laptop just isn’t a good enough reason for most folks to get one especially if they actually have to pay more for it than they would an iPad.
When it comes to tablet apps, Apple’s lead here isn’t just crushing the competition, it’s defining what a tablet is and how it is used. While there will eventually be more Android apps than there are today, we don’t see the platform catching up to Apple’s iOS platform as a whole, let alone on the tablet-specific side, and if there are no (or relatively few) apps, consumers won’t buy Android tablets, which will perpetuate this cycle.
Again, this is in stark contrast to the smartphone market, where Internet access is the killer app and all the other apps are just the icing on the smartphone cake. Android smartphones surf the Web quite well, and that’s good enough, especially for the good enough crowd that has allowed Windows to dominate the PC market for so long.
Any analyst making projections fpr the tablet market based on the smartphone market (or, heavens forbid, the PC market) have missed the forest for all those damned trees that keep getting in the way. Apple’s buying power combined with its app lead and the importance of the app experience in creating demand for a tablet in the first place are going to allow Apple to maintain the kind of dominance the company had (and still has) in the digital media device market with its iPod.
Smartphones are not tablets, and every Wall Street analyst following this market needs to do what they can to grok that notion if they want to be able accurately predict where it goes.