Apple is Losing its Tablet Market Share, can iPad Mini Help?

Rita is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The most painful feeling for a player is when someone else beats him in his own game. Apple (NASDAQ: AAPL) has been an innovator and a pioneer in introducing innovative devices in the consumer electronics space. The iPhone changed the way consumers used to look at the Cupertino-based company, and the impression was further strengthened by the iPad. However, over the past few quarters the dominance of Apple products have been heavily challenged by Google’s (NASDAQ: GOOG) Android-powered devices, and particularly by the South Korean giant Samsung.

In my previous article I discussed the present situation of the smartphones space. Currently Samsung is the market leader when it comes to smartphones, with a 31% market share, while Apple accounts for only 15%. The popularity of the Android operating system and affordable smartphones from Samsung have snatched away the pole position from Apple and paved the way for the high-priced Android smartphone models.

Though iPhone is just one phone against several smartphones from Samsung, the bottom line is as a smartphone company Samsung has a greater control on the market than Apple. As of now Samsung is the champion and it has successfully defeated Apple in its own game. But the question is, will the same thing happen to Apple in the tablet space?

Recently IDC released its Worldwide Quarterly Tablet Tracker report and the findings of the study suggest that Apple should start looking out for Samsung in this space too. To date Apple has the highest market share in the tablet space, but the share is falling gradually. Over the past few quarters Apple’s market share has dropped, from 59.7% in Q3 2011 to 50.4% in Q3 2012. This obviously comes as excellent news for Google. The online search provider has already gained a dominating position in the smartphones OS space, and now with Apple’s tablet market share being reduced to 50%, Google’s share in the space increased and now accounts for the remaining 50%.

<img src="/media/images/user_13114/q312-tablet-graph-2_large.jpg" />

(Source: IDC Worldwide Quarterly Tablet Tracker, Nov. 5, 2012)

So, where did Apple's market share go? The lion’s share of what Apple lost went to Samsung, and the remaining portion went to Amazon (NASDAQ: AMZN) and Asus. In every quarter Samsung has been able to push up its shipment volume. Back in Q2 2011, Samsung had shipped only 1.1 million tablets, and today that figure has moved up to 5.1 million. Nevertheless, the shipment volume has increased for Apple too. But, even though Apple’s shipment surged 26% compared to the prior year period, the company couldn’t maintain its hold on the market.  

<img src="/media/images/user_13114/q312-tablet-graph-3_large.jpg" />

(Source: IDC Worldwide Quarterly Tablet Tracker, Nov. 5, 2012)

Basically, the market expanded by as much as 49%, and a major portion of the new market went to Samsung. Year over year, Samsung’s shipments have surged by a whopping 325%, up from 1.2 million units in Q3 2011 to 5.1 million units in the recently concluded quarter.  Even Amazon’s Kindle Fire and ASUS-manufactured Google Nexus 7 did wonders for the companies. These $199 worth 7-inch tablets were hot sellers and forced Apple to consider the idea of launching a smaller tablet. Compared to Q2 2012, the shipment volume of Kindle almost doubled to 2.5 million units.


<img src="/media/images/user_13114/q312-tablet-data-chart-1_large.jpg" />

(Source: IDC Worldwide Quarterly Tablet Tracker, Nov. 5, 2012; IDC Worldwide Quarterly Tablet Tracker, Secod Quarter 2012)

Speaking sequentially, the drop in Apple’s market share is even higher. In Q2 2012, Apple had a market share of almost 70%, which now stands at approximately 50%. Even the shipment growth is in the red when compared sequentially. Apple’s shipments dropped from 17 million units in Q2 2012 to 14 million in Q3 2012: a drop of 18%. However, the decline in the number can be directly attributed to the consumer behavior. In anticipation of the iPad Mini and the latest 4th-generation iPad, the majority of consumers backed out from making purchases. Apple also did not introduce any device in the third quarter of 2012 and this added to the low shipment numbers.

Samsung was quick and agile to take the advantage of the situation and launch the Galaxy Note 10.1 tablet. On a sequential basis, Samsung posted 113.3% higher shipments, and this is even more amazing since the market only grew by 10.8% during the same period.

So, keeping Apple’s future in mind, the numbers look a little scary. Samsung is growing fast and is all set to take on Apple in the tablet space too. Maybe the only reason why Samsung still hasn’t surpassed Apple in the space is tablets are still not a widely accepted device. As the market grows and develops over time, maybe Samsung will have the lion’s share. So, in a situation like this, can the iPad Mini be of any assistance? Well, the answer is not as simple as a yes or a no.

Recently Apple reported that it has sold as many as 3 million units of the iPad Mini and the 4th-generation iPad, surpassing the previously expected 1 million to 1.5 million. Though Apple did not give any break down for the devices, several analysts are estimating that the company may have sold as many as 2.3 million iPad Minis out of the total 3 million units. With figures such as these, maybe Apple’s move into the smaller tablet market was what it needed to gain back its lost market share. But again, just these numbers will not be enough. In order to meet analyst estimates and reclaim the tablet market, Apple will need to sell many more units of the device.

The encouraging point here is that until now Apple has sold only Wi-Fi versions of the new iPads, as the cellular network versions of the models are yet to be launched. Industry experts and analysts are expecting the shipments to improve hugely once the cellular versions come out. Apple’s absence from the 7-inch tablet space has been an expensive mistake that the company is finally fixing. Though priced a little high at $329 starting, the iPad Mini is surely grabbing the consumer’s attention, and thus may turn out to be a solution for Apple’s diminishing market share.

Dig Deeper

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