Tablet Sales Expected to Surge, While Netbooks Fade Away

The tablet market is expected to dominate PC sales for a number of years to come, but forecasts about consumer electronics products are often wrong. It was only two years ago that the industry and researchers expected netbooks would become the growth sector of the market. That didn't happen.

Research firm IDC has forecast that tablets shipped worldwide will hit 44 million units this year and 71 million in 2012. Growth in sales of the small PCs is already robust. IDC reports that "the worldwide media tablet market grew 45.1% in the third quarter of 2010 (3Q10), driven almost exclusively by global demand for Apple's groundbreaking iPad."

Apple's iPad (AAPL) dominates the market, with 87% of the market share in the third quarter of last year -- which translates into 4.2 million units. Apple faces modest competition from Samsung's Galaxy, Motorola's (MOT) Xoom and the new Research In Motion (RIMM) BlackBerry Playbook. A number of these will run on Google's (GOOG) Android operating system, which has gained market shares from Apple in the smart phone business.

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Back in July of 2009, research firm DisplaySearch anticipated huge growth in netbook sales: "Netbooks are projected to grab a 20% share of the [PC] worldwide market for 2009. . . . By region, this year's netbook sales are forecast to jump 260% in China, 137% in North America, and 88% in Latin America." That prediction was way off.

Netbook products from Asus and a number of mainstream PC firms flooded the U.S. in 2008 and 2009. Many cost under $300 and ran Windows. The machines were under-powered with inexpensive processors. They were good for web surfing and email, but little more. And then, in early 2010, the iPad hit the scene. It's widely acknowledged by the PC industry that Apple's tablet dampened the success of the netbook.

The most likely enemy of the tablet is the smart phone. Sales of products from Apple, HTC, and Motorola are rising rapidly. Samsung and Nokia (NOK) are expected to enter the market aggressively this year. Smart phones are set up to do most of what PCs do. They will soon be connected to fast 4G networks. Most smart phones cost under $300 when the are tethered to two-year carrier subscriber plans. Smart phones have at least one important edge over tablets. They can be used easily for voice communication.

Sales of tablet PC sales may hit the expected levels, although netbook sales did not. In technology, the next, new thing often undermines what experts forecast.

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