As reported in Apple’s Q2 2014 conference call, iPad sales significantly declined compared to the year ago quarter. A year ago, they sold 19.48 million units. This year, only 16.35 million. That’s a pretty big decline.
It’s not something that was totally unexpected. As early as August 2013, I noted that iPad sales and tablets sales in general were losing steam and this could be a longer-term trend. I wrote many times how the idea that tablets are replacing PCs is a fallacy, and that the iPad was actually carving out a new market, not replacing an existing one (1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13).
A summary of the current situation can be found in one of my posts that I wrote in Jan. 8th, 2014 (“What the Tablet Market Isn’t”).
So what I sense is the possibility that tablets (as computing devices) may have hit a roadblock in adoption, and this is due to the potential market being actually much smaller than envisioned. Much smaller than the PC market.
If this is the case, then what should be done about it? Or even, is it worth trying? Are we trying to artificially enlarge a market that is actually rather small?
These are questions that may be answered in the next iteration of iPads from Apple. Remember that “low-end disruptions” are at first not very capable, but they eventually move up-market through innovations that enable them to compete with high-end products but retain their simplicity. I strongly doubt that huge tablets or 2-in-1s qualify as this kind of innovation. Apple (and most likely only Apple) may have the answer in one of its labs.
If we look into the smaller details of Apple’s Q2 2014 earnings call, we see evidence of this.
“Thousands” of iPads being used at delivery company FedEx every day.
U.S. Department of Veterans Affairs is planning to deploy 11,000 iPads to change how doctors and patients interact. Will allow quick access to real-time secure medical information.
iPad has over 95 percent share of U.S. education market.
These are all markets where PCs couldn’t previously satisfy the “jobs-to-be-done”. In these markets, the iPad is not a replacement for PCs; it is allowing computing to happen in occasions where it was not previously feasible and creating a new market.
Cook said Apple has to focus on iPad penetration in both education and enterprise markets to drive further sales.
Creating a new market is generally much harder and a slower process then entering a pre-established market, especially if you are targeting government and enterprise. You have to consider the budgeting cycle and the internal decision process is longer and more complex. It is hard to prove benefit when there aren’t many examples to draw from. We all know that government and enterprise tend to be laggards in technology adoption due to the time they take in careful consideration.
It’s going to take a bit more time.
Naofumi Kagami 