Apple Inc. is looking for new ways to grow, but the firm’s tablet business just won’t budge. Last month tablet rival Amazon.com, Inc. unveiled a new $50 tablet, and said that they could be bought at a discount in packs of six. Those making the internal components (IC) for the computing devices can feel the wind changing, and a new report suggest they’re pulling out of the market.
A report from Digitimes, published early Wednesday morning Eastern Time, says that firms are looking to shed their tablet IC segments as profits keep falling. There are two major problems in the market. Firstly there is a massive drop in the number of gadgets being bought across the world. Second, the prices are being pressured lower and turning profits into nothing.
Tablet makers stop producing
The drop in demand is stark. Digitimes says that the people it spoke to reckon that Android tablet sales will hit just 160M, or perhaps less, for the full year 2015. In 2015 shipments may fall to 120-130M say the same sources. That’s a massive 10-20 percent fall in sales year-over-year, and it’s clearly hurting all the industry players, including Apple Inc. .
The sources went on to reveal that many tablet IC firms were looking to escape from the space, either by selling off, cutting down or shutting down. The report says that large-size smart phones are really to blame for the change in the tablet market, and smaller, cheaper, tablets just can’t compete.
The real issue is the same that’s affecting the smart phone market. There’s no room at the premium end of the business, so all OEMs that aren’t Apple, or a handful of Android makers, need to live on the margin. Prices for chips and other tablet ICs, particularly those on the low, commodity, end are driven down as a result.
There is a big gap between demand in the smart phone market and the tablet market, however. Despite being around for longer smart phones sell more units each and every year. The same isn’t true for tablets, and that’s hitting Apple just like everyone else.
Apple Inc. stands alone
Apple is also seeing a huge drop in demand for its tablet, the iPad. The September 9 event at which the firm revealed the iPhone 6S saw the launch of the firm’s latest entry into the line. The iPad Pro will sell for a premium price, and Apple will have no issue making a profit. That doesn’t mean everything is fine for Cupertino in the tablet business.
iPad sales are falling, and there doesn’t seem to be anything that Tim Cook and his team can do about it. We’ll see how sales of the iPad Pro turn out, and whether the $1,000+ tablet can attract anyone running a business, but Wall Street is already calling for the segment to contract before those sales are counted.
Gene Munster of Piper Jaffray reckons that sales in the business will fall 4 percent year over year in 2016. That’s slower than the fall in 2015 over 2014, but it doesn’t exactly scream growth. Those with shares in Apple are looking for the firm to come up with a big new idea to boost both sales and profits.
The iPad business just isn’t it right now, but the firm will do better than 90-100 percent of Android tablet makers. With Amazon selling a machine for $50, it’s hard to see how anyone in the commodity tablet world will be able to compete.