This is the second in my series of posts where I make predictions for 2017. The first one was about Autonomous Driving.
iPad sales growth
2016 was the year when we started to see revenue growth (but not unit growth) in the iPad. Many were quick to say that this was due to the introduction of the iPad Pro, but I think this misses the fundamental dynamic of what is happening in the tablet market. In fact, I have said in this blog multiple times, that most tech pundits have not understood the dynamic of the tablet market from the very beginning. The people who attribute revenue growth squarely on the iPad Pro inevitably expect a very slow growth going forward, since they do not see continuous growth drivers. My prediction is different in that I expect accelerated growth that will be in the high single digits.
Here I will illustrate my thesis and show why we should expect strong growth in 2017.
The above chart shows my hypothesis for what has been happening in the iPad market from the beginning; why we saw a very strong introduction, followed by a decline, and then a plateau.
- First of all, I separate the iPad market into two distinct segments. The first is the “Entertainment” segment which includes gaming, video watching, etc. The second is “Productivity” which includes writing, drawing, video/audio production, etc.
- In the initial phase of the market, we saw a huge uptake of usage in the first “Entertainment” segment. Even though the iPad was a new category device, looking at its gaming and video capabilities, it was a clear and obvious replacement for mobile game consoles like the Play Station Portable and the Nintendo 3DS. It was also a simple replacement for secondary TV screens. Since consumers could easily see the benefits and how it would work, the initial adoption was very rapid. That is, there was no need for an early adopter phase where only a fraction of the population would understand the merits of the device.
- However, as smartphones gained processing power and larger screens, they also started to satisfy the “Entertainment” segment. Hence the later decline in sales for this segment which started to happen in 2013-14.
- All this while, the “Productivity” segment of the market was going through a regular adoption curve of new category products. That is in the first few years, only the brave early adopters used iPads for “Productivity”. However, the number of these users has slowly but steadily been rising. In many cases, this has been happening more in the corporate market than in consumer markets because frankly, “productivity” is more important for our work than for leisure. It is important to note that whereas larger screen smartphones are adequate for playing games and watching videos, it is really torture editing a spreadsheet on smartphones. The benefits of a larger screen tend to be more pronounces in the “productivity” segment.
- Therefore, looking at the sum of both segments, we will see something like the yellow curve where a period of decline will be followed by steady growth.
Although I have made the “productivity” segment to show linear growth in the above chart, in reality, it is more likely to be sigmoidal. Therefore, when the “productivity” segment gains steam, we are likely to see quite steeper growth.
From my thesis, I can predict the following;
- We will see strong growth of the iPad in 2017 onwards. 2017 will start slow, but growth will accelerate.
- Since growth will come from “productivity” segments, the seasonality of iPad sales will become less severe.
- We will continue to see strong sales coming from corporations, but sales to consumers may continue to be weak.
Since 2017 is still the early phase of “productivity” segment adoption, it might yet be a bit early to see a strong impact in 2017Q1 and Q2. However, I do expect 2017Q3 to show a significant effect. 2017Q4 will be less impressive due to the “entertainment” segment dominating during the holiday season.
2 thoughts on “Predictions For 2017: iPad Sales Growth”
This prediction is more appropriate for the Microsoft Surface line, than it is for the IPad, in fact I think the IPad will see a decline while the surface will gain momentum
Yes, that is possible. However, even if Surface does grow and iPad does decline, total iPad sales will still dwarf Surface.
To make a meaningful comparison between iPad and Surface, it is not enough to look at growth and decline. You have to look at the absolute revenue of each product and compare these.
iPad is reported too sell 10x that of the Surface. At this point, is it really meaningful to compare the growth rates of the two?