Tablet sales are booming – but Apple’s share slides

Booming sales of compact tablets have helped Android overtake Apple in sales and – according to one analyst firm – “buzz”.

Tablet sales were up by 43% in the second quarter of the year, making up 31% of global computer shipments, Canalys said.

Two thirds of tablets sold were in the compact category, defined as smaller than 9in – a type of device Steve Jobs once derided.

Samsung, Amazon, Lenovo and Acer each posted annual growth rates of more than 200% – from small starts, of course – while Apple’s shipments slid 14% and its market share fell from 71% to 43%.

“Consumers have been evaluating tablets and the results are now in,” said Tim Coulling, Canalys senior analyst. “With touchscreens contributing to a high proportion of the build cost of a tablet, small-screen products can be priced very aggressively.”

Some of that shipment decline is down to Apple’s iPad and iPad mini both awaiting updates, as current models were launched at the end of last year.

While Apple’s tablets are expected to be refreshed within the next few months, Canalys said “new product launches will have less impact on its shipments in future”.

“When Apple does decide to refresh its iPad range it will not experience the buzz of previous launches,” said Canalys analyst James Wang. “Tablets are now mainstream products and hardware innovation is increasingly difficult. With branded Android tablets available for less than $150, the PC market has never been so good for consumers, who are voting with their wallets.”

However, such low prices force tight margins on manufacturers, with the real profit made in content, applications and accessories. Indeed, it was widely reported that each Kindle Fire sold costs Amazon money, which it hopes to make back on content sales.

That’s a problem as Android users have a smaller selection of tablet-optimised apps to choose from, and “tablet app downloads from the Apple App Store dwarf those from Google Play”, the analyst firm said.

And, while Apple is selling fewer tablets than before, its higher margins mean it still makes more money from tablet sales than its competitors.

Canalys noted that Apple could yet move into the lower-end tablet market, but will be in no rush to do so – though it may make a similar move with the iPhone. “It will still make good margin on a cheaper iPhone but will struggle to do so with a cheaper tablet, and would instead need to rely increasingly on accessory sales and, likely, subsidy from apps and content purchases,” the company said.

Larger tablets

Canalys said that the market for 10in tablets had “stalled”, saying that “even Apple has found it harder to sell its larger iPads in recent quarters”. Earlier this year, analysts said the smaller tablet had overtaken its larger sibling, with the iPad mini claiming 60% of iPad sales.

Meanwhile, Microsoft’s Surface RT will sell better thanks to price cuts, but Canalys predicts that the price could fall further still. “Heavily discounted Surface RTs will fly off the shelves,” said Coulling. “Expect prices to continue to fall though, as the starting price of $350 is still too expensive to spark an HP TouchPad-style buying frenzy.”