As Global Tablet Sales Rise, Battle Increases for Bottom of Markets

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Apple-storeNew data from research firm IDC show that sales of Google Inc. (NASDAQ: GOOG) Android-powered tablets will move ahead of Apple Inc.'s (NASDAQ: AAPL) iPad market share this year. However, the nature of the change has a base in sales of cheap machines, which makes the Android victory less important. It actually could be bad news for companies that have adopted the Android operating system, because profits at the low end are hard to come by.

In a world with seven billion people, most of them very poor, tablet sales somehow will reach 190.9 million this year, according to IDC. As if that number is not mind-boggling enough: sales are forecast to reach 350 million by 2017. Either many consumers will replace current tablets or global individual ownership will soon reach well over a billion, on its way to two billion.

Behind the rise, according to IDC, "A predicted surge of smaller, lower-priced devices in the tablet market." Apple might be lucky to fall behind Android in a period when margins mean less than sales, if market share is the primary goal. And Apple will lose its spot as the leader in unit sales. According to IDC:

Android's share of the market is forecast to reach a peak of 48.8% in 2013 compared to 41.5% in IDC's previous forecast. Android's gains come at the expense of Apple's iOS, which is expected to slip from 51% of the market in 2012 to 46% in 2013.

At the center of the analysis of Android's rising share advantage is what it costs to build and market a "smaller, lower-priced device." Larger, more expensive tablets, particularly the iPad, have been wildly popular in the developed world. This is one of reason Wall St. worries that Apple may go down-market in an attempt to keep numerical superiority over Android. But the idea is a bad one because it puts margins at risk. No investor wants to see iPad revenue rise as profits collapse.

Android has proved elastic enough to be at the core of almost any computing machine, whether it is a PC, tablet or smartphone. However, Google does not rely on Android for direct revenue, so the search company likely does not care much which tablet manufacturers use it. Cheap Android-based products do not trouble Google's sales at all.

Apple may have lost some share of the tablet market, but at the high end of the market, where it has its strength, at least it can make a great deal of money.


Filed under: 24/7 Wall St. Wire, Consumer Electronics Tagged: AAPL, featured, GOOG
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