Apple struggling with iPad sales? Blame the damn phablets

Apple had very strong sales in the smartphone segment in the Q2 , as announced during the earnings call last week. However, it didn’t do great as far as tablets are concerned.

The one market, where both the tablets and smartphones did well was Japan, as a new report for Q1 sales by Kantar points out . “Japan’s love affair with Apple shows no sign of fading,” Dominic Sunnebo, a director at Kantar, said, adding that the great success of the iPhone in the country with nearly 55 percent share in Q1 ending March 2014, has had a ripple effect on iPad sales.

But the same cannot be said for the rest of Asia and indeed in many other parts of the world. In China, Kantar says phones with a screen larger than 5 inches made up 40 percent of sales in March. “It’s clear that phablets really are changing the way Chinese consumers use smartphones. More than one in five phablet owners now watch mobile TV on a daily basis, half do so at least once a month, and this is without the widespread availability of 4G. As 4G infrastructure expands in China, the demand for data is going to be unprecedented, paving the way for carriers to boost revenues significantly through larger data packages,” Sunnebo said. This has been the consensus of earlier reports too, with the IDC announcing the same late last year.

At the same time as they are growing larger, smartphones now offer productivity apps to compete with tablet apps too. Tablets, especially in the 7 to 8-inch territory, as suffering in sales, in comparison to large phones. As this post by Andreessen Horowitz’s Benedict Evans says , out of all of Apple’s product lines, the iPad is doing the worst and has actually shown a decline in sales since early 2013. So this is not just a quarterly sales glitch, but a deeper problem.

The problem with tablets for any manufacturer is that they are competing against two other product categories i.e PCs and smartphones. PCs are seen as more powerful and are certainly a better option for gamers and professionals, than a tablet, which has nascent or woeful productivity support and less powerful hardware. Smartphones feature similar hardware to tablets, are more portable and more convenient for anytime connectivity.

The upgradation time curve on tablets is also higher, as opposed to the smartphones, which means users are less likely to upgrade tablets over two-three years, but are more likely to do so with smartphones. And as smartphones get bigger, tablets keep getting more irrelevant. So it’s a vicious cycle and one that’s affecting Apple’s iPad sales.

Rumour has it that Apple is about to jump on to this bandwagon with the next-gen iPhone speculated to have a display close to 5 inches . That doesn’t make it an ‘iPhablet’ though it does put Apple closer to the competition, but what it will do to revive flagging iPad sales is yet unknown.