Let's start with a basic premise that not all tablets are created equally. There are price tiers, but the differences are also defined by how tablets are used.
This is important because over time, customers from the same market tiers could move to cheaper products if they fit their requirements.
And this is why Apple needs an iPad Pro - the much-rumored, bigger screen iPad.
First time vs. repeat buyers
In the chart above, the tablet install base data for 2013 is from ABI. I've estimated 2011 data by using Transparency Market Research's 81.2 million figure for the total install base and IDC's 2010 & 2011 tablet shipment estimates to get a platform split.
The data clearly shows the explosion in tablet ownership, with Android growing faster.
Now, compare this data, with the chart below:
The chart above shows IDC's reported branded tablet shipment estimates from 2012 to Q3 2013, i.e. the time frame between the two install base measurements shown in the first chart. While we're missing one quarter of data (Q4 2013), it is obvious that the growth disparity between the iPad and Android tablets is smaller. Based on this pattern, it seems that iPad sales are being driven by repeat buyers, while Android tablet sales are being driven by first time buyers.
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Good enough Android tablets
Now compare this pattern with the tablet market tiers in the figure below (Keep in mind, these tiers are based on usage patterns and not on price):
Each lower market tier is successively larger and with lower penetration than the previous one. Branded Android tablets entered the large mid-tier market with "good enough" offerings that prevented the iPad from making a downmarket move.
As a result, even the lower priced iPad Mini primarily catered to repeat buyers and cannibalized iPad sales instead of increasing the size of Apple's potential market.
This explains the rapid drop in the iPad's shipment growth over the last year.
Now, what would happen when branded Android tablet vendors make a concerted upmarket push? This is inevitable because branded vendors are facing increasing margin pressures from regional brands and white box competitors in mid-market tiers.
Increasing competition in the limited high-end market could cause iPad shipments to flat-line or even decline over the next few years.
In response, Apple is likely to aggressively target the only market tier remaining above -- the enterprise. There is a reason iPad Pro rumors have been gaining steam.
(A version of this article original apperared in Tech-Thoughts and is posted here with permission of the author).
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