Must-read: Would a bigger iPad succeed in the tablet market?
Why Apple introducing a 12.9-inch iPad could affect the market (Part 4 of 7)
Overall, the tablet market is slowing down
In the prior parts of this series, we discussed how a bigger Apple (AAPL) iPad could increase Apple’s share in the tablet market. That market’s currently dominated by Google’s (GOOGL) Android-based tablets. We also discussed how this would help Apple overcome the potential threat from Microsoft’s (MSFT) Surface tablets in both the consumer and enterprise segments. But the tablet market as a whole is slowing down, as it works differently than smartphones.
Consumers usually replace smartphones frequently due to contracts with telecom providers—especially in developed markets like the U.S. You can buy an iPhone from Verizon (VZ) or AT&T (T) at a highly subsidized price with of a two-year contract. Once the contract expires, you need to replace your smartphone with the latest model and again enter into a contract. This helps mobile vendors increase their sales as well.
But the tablet market works differently. There are no contracts with tablets. So consumers are free to use their device as long as possible. This means a higher replacement cycle for tablets than smartphones, which is the main reason for slow tablet sales growth.
Larger-screen tablet demand to increase in proportion
Within the tablet market, larger-screen tablets could grow at a much faster rate than smaller-screen tablets, according to NPD DisplaySearch. As the chart above shows, tablets with a screen size between 7.0 inches and 7.9 inches will continue to decline in proportion, from 58% of tablet sales in 2013 to 43% by 2018. On the other hand, NPD expects tablets between 8.0 inches and 10.9 inches to slightly increase, from 40% to 45%. It also expects tablets with screen sizes greater than 11.0 inches to steadily increase, from 2% to 12% during the same period.
As the difference in screen sizes for a phablet (or a bigger smartphone) and a tablet reduces, consumers will prefer not to carry two devices. But as the difference between the screen size of a smartphone and a tablet increases, the devices serve different needs. This is probably why NPD expects the proportion of larger-screen tablets to increase.
So this is another reason why a bigger iPad could be a success.
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