Apple's iPad will not be able to emulate the iPhone's success


Believe it not, tablets are not a new device category--Microsoft attempted to bring them to the mass market over a decade ago, and failed. With respect, the state of technology at the time didn't afford them much of a chance, leading to heavy and clunky devices with very limited appeal.

Times are different now, with the category "gaining mass acceptance faster than VCRs, MP3 players or other comparable products at similar stages in their evolution," according to the Boston Consulting Group (BCG).

Another market research firm recognising this upsurge, Gartner, has rather hurriedly revamped its forecast for laptops downwards from a near 15.9 per cent growth in 2011 to around 10.5 per cent, claiming that it didn't fully appreciate the impact that tablets were having on the market.

The current pioneer, Apple, has now reset the benchmark for tablets with the launch of its iPad 2. Interestingly, many observers believe that the appeal of this latest Apple device is less associated with technical advances--of which there are few--and more about its size, build quality and the rather gimmicky magnetic "Smart Cover" cases.

But while Apple zealots might be imagining that the iPad will follow the same trajectory as the iPhone, times are again different.

On this occasion the competition is not that far behind--months instead of years, compared with the stunned lack of response to the iPhone. This is seen in Apple announcing aggressive pricing, and making the iPad 2 available in 26 countries starting this month--with perhaps the biggest shock being that this device ill be sold with either black of white casing from day one (!). Also of note is Apple's recent backtracking from its attempt to bypass European operators by offering iPads with remotely activated SIM cards.

The pricing dynamics are also different for the iPad. BCG maintains that the majority of potential tablet purchasers are unwilling to pay the current high prices associated with tablets. Italians were among the most cost sensitive, only willing to pay around €230 for a tablet, while Germans would go slightly further and spend €260. Quite a distance from the €500 Apple is expected to charge for its iPad 2.

This downward pressure on price is likely to benefit Android-based tablets as the hardware vendors congregate around the OS and fight for market share on price alone.

RBC Capital Markets seems to be adopting this view, predicting that the Google's platform will have captured a 40 per cent tablet market share by 2014. However, the firm accepts that, while the iPad might continue to set the point of reference for user experience, it will be constrained from entering certain sectors due to low-cost vendors from Asia driving hardware costs down and developing numerous variations on the basic tablet theme. And that is largely where we find ourselves today, with the iPhone and smartphones being developed in Asia/Pacific countries. --Paul

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