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Estimate: iPad units to overtake netbooks in 2012

According to Gartner, mini notebooks constituted less than 18.0% of the total mobile PC market in the second quarter of 2010, down from 20.0% of the total market at 2009-end. Gartner expects mini notebooks market share to drop to approximately 10.0% by 2014.

However, worldwide PC shipments are projected to total 367.8 million units for the full year 2010,

via Near-Term PC Growth Not Visible – Yahoo! Finance.

Speculation about the iPad production ramp indicates that the iPad will ship about 14 million units this year and 36 million next year. Projecting a forward growth rate of 50% and adding the Gartner forecast above gives us the graph on the left.

The iPad (plus competitors) will likely overtake the sales of mini notebooks as soon as 2012. The collapse in netbook sales is likely to be much more rapid than Gartner suggests.

  • Jim

    Mini-notebooks are hardly collapsing but they've stagnated and are increasingly seen as yesterdays cheap technology. Unlikely the new dual core Atom will revitalize this and all the hype will be in tablets. The question is how much Android tablets will sell. Google appears reluctant to make noise out of the 2.2OS devices knowing that the touch experience on a larger screen is not at all optimal. The 3.0 (Gingerbread) version may rectify this but by then Apple will be launching iPad V2.0 (and will also realise an up-sell of the current version with the release of iOS 4.2 and AirPlay). Very odd that the rest of the sector has taken so long to respond to the iPad. Blind-sided comes to mind…

    • http://www.asymco.com asymco

      Not at all surprising. When the iPad launched the vast majority of industry experts detailed how it would fail:

      http://www.asymco.com/2010/03/09/music-sweet-musi

      It's been nine months since reveal and six since sales start. A blink of an eye in terms of product development cycles.

    • http://www.asymco.com asymco

      Netbook collapse began in April:

      http://www.asymco.com/2010/04/13/shocker-netbook-

      More signs emerged in July:

      http://www.asymco.com/2010/07/13/remembering-netb

      Now the whole PC industry is in some form of inflection.

      • Jim

        But there were iPad-like devices shown at the trade shows in January. Then all went quiet. I think this was because most competitors expected Apple to launch a $1000 device. With it's features, amount of Flash memory and quality, the prototypes offered less for the same price. Even now, the Samsung Tab isn't looking particularly competitive.

  • iOSWeekly

    It's staggering really.

    Unlike the iPhone, which entered a large existing market of Cellphones and has managed to capture a modest fraction of the market (although with the majority of profits) – with the iPad entering a new tablet market it so far iseems to be more resembling the MP3 market development with apple taking a large majority!

    I'm not saying they are going to end up in 5 years with 70%+ of tablet market share, as I think unlike the iPod, the iPad is seen as a threat to the large computer vendors core PC marke so they are gonna have a lot more fight than the mp3 competitors, but I think it's not unreasonable to hope for a marketshare close to 50% (at least in the consumer market).

    And if regular desktops/laptops move to touch based OS also, then apples share of that market could conceivably be quite a bit higher than it's current 5-10% share. I think everyone is expecting a hybrid OS X / iOS touchsreen iMac within the next 24 months. Will be great to design apps & edit video on one of those. And surely the MacBook air hybrid would follow.

  • http://, Iphoned

    Very interesting. If apple sells 36m ipads next year that would be around $21b in iPad revenue at hifg margins. About same as iPhone rvenue for 2010.

    • http://www.asymco.com asymco

      I make it about $8.6 billion in operating profit and about $9/share in earnings. Using a multiple of 20x on earnings it should add $180 to the share price. This assumes that people will be willing to pay for earnings, which is far from certain.

      Apple will put another $8 billion or so into their bank account or lend it to the US government.

      • http://, Iphoned

        Assuming iPad's net margins of about 26%, $21b revenue would bring only about $5.5b profit, or about $6/share. Using a more realistic 15x multiple, that's about $100 share due to iPad alone. Give it another $150 due to iPhone and you'd be left with the rest of the business fo free. Of, course, iPhone/iPad margin compression due to competition remains the major risk.

      • http://www.asymco.com asymco

        15x is realistic? For the iPad business that is growing at least 50% and probably closer to 100%? You're more conservative than I would be.

  • alcatholic

    A little anecdote on iPad prospects in Russia.

    You might recall that Russian President Medvedev held up an iPad a few days after the iPad launch while speaking at an education roundtable.
    http://www.lifenews.ru/news/22314

    Then Medvedev went to Silicon Valley and met with Steve Jobs at Cupertino.
    http://www.youtube.com/watch?v=qL_mgcEy1q4

    Well, on Russian TV a popular medical show that likes to use slick computer graphics to illustrate medical concepts and procedures started using an iPad. The host holds it and uses to show videos and I think interactive graphics. The show is the most watched health show on the main Russian Channel, Health with Елена Малышева. I don't have a link, but my wife watches this show in the mornings.

    I think it is public uptake like this by cultural elites all over the world that is behind the some of the explosive demand of the iPad.

    Oh, and when my wife's childhood friend visited from Siberia, this friend and her 13 year old boy went on a 2 day hunt for an iPad. They found one at the UCLA computer store and talked the student into letting them buy it using HIS own id. :)

  • Iphoned

    I am more conservative on iPhone/iPad business PE because there is a serious risk that those are operating at peak margins which would settle to a more realistic level at some point. Obviously, it is a judgement call, but one can plainly see Androids incredible growth in phones, avoid to hit the tablet space, and ms imminent re-entry in November. One can't just dismiss those.

    • RattyUK

      While you are right in saying you can't dismiss those. The current situation with the "big guys" Dell and Samsung for example is that the only way they can come in under the iPad is by getting carriers to subsidize the cost. So in one fell swoop they are putting barriers up between themselves and the carriers.

      Everyone thought that Apple's price for the iPad was going to be around a grand. When Apple announced an entry point at half that value the competitors evaporated. It has taken them seven months to even get back into the game meanwhile the unsubsidized price of the Samsung Tab is around €750 so at that cost for a smaller, light plastic iPad clone (the current home screen is a direct rip-off and the mechanical position of the dock connector is in the same place too.) is still more expensive than buying the real thing. How are they going to compete? Pray that Apple raise their prices?

      • Jim

        Apologies, saw your post after I posted above – agree entirely!! Add to this the possible lock-in Apple has on some key component prices, the scale up of A4 chip usage (new iPod Touch and $99 AppleTV) and it's likely the margins will remain stable.

  • RobM

    Spot on RattyUK!

    Given Apples economies of scale across the iOS ecosystem plus the huge number of products they are selling, expect Apple to drive this new market fast and hard! And this market has a product that Android cannot compete against – the wifi iPad. See Asymcos other posts on iPod Touch competition.

    Long on APPL!

  • http://, Iphoned

    Explain to me how you expect apple not to cut iPhone prices when Samsungs competitor phones are free with contract on Amazon and selling by the millions per month including on Att? And that's just Samsing. Yes, I know Iphone is superior (I have one and happen to think so) but $200 is a huge diffence to an average consumer. Now demand exceeds supply for iPhone and best alternatives so this is not as bad as it is going to get. But once supply meets demand, and it will, competition will get even more cutthroat. Android phones already blew past the iPhone in sale, so they are collective,y major competitors. I don't know how you can ignore a serious risk of a price and thus margin cut.

    • http://www.asymco.com asymco

      I don't think Apple competes in commoditized markets (meaning that improvements in products are not valued and hence competition turns to price). If the product can be improved, it will be improved and it will be priced according to that value added. If the market turns into a pricing competition then Apple will probably exit.

      There are two assumption I use (which probably you do not share) (1) smartphones will not be good enough in the next five years (2) demand and supply will not meet anytime soon.

      • Jim

        Add to this the fact that $200 sounds a big difference, except when added to the two-contract costs. Apple favored full cost models (no subsidies) that is common in Europe. Why are we so gullible with initial prices in North America? Apple has the mindset for sales of the iPhone and likely doesn't expect to maintain marketshare. So why cut prices and profits? The only guaranteed effect of that would be a drop in share price.

  • Iphoned

    This will be unteresting to watch….the next 6 months should be amazing…I wonder also how the two lawsuits will play out. Oracle did ask for the destruction of Android code…and I don't really understand how Apple competitors can just get away with adding patented touch interface to their devices….

    • http://www.asymco.com asymco

      Trouble with IP lawsuits is that they can take years to play out.

  • Iphoned

    @Jim

    "So why cut prices and profits? The only guaranteed effect of that would be a drop in share price."

    Well, my point exactly. Except I fear Apple may have to cut prices on iphones to maintain reasonable market share. Just because in Jobs' absence they allowed their PC share to drop to under 5%, does't mean it was a desirable outcome.

    • kevin

      Apple''s margins are the best in the industry because they work it hard at both ends. They promote the iPhone's advantages to consumers – retina display, Facetime, particular apps, iMovie, AirPlay, etc. – thus increasing value and increasing demand, resulting in carriers willing to pay more. On the other end, Apple keeps costs really low because its supply chain management is one of the best (lacking only in scale and distribution to Nokia and Samsung) and they reuse components across all their devices, thus allowing for huge volume buys. They also leverage their software across all their devices (Macs included). Because Apple has the brand power, they are most often leading with competitors reacting. Thus, they can often move early, whether it's buying up companies or investing (prepaying for and locking up component supply) in companies. (There were many reports that tablet makers put their designs and marketing plans on hold late last year while they waited for Apple to announce the iPad.) Google's vision seems all-over-the-place, and Nokia can't execute on their vision.

      Droid (Verizon) made an intentional attempt to promote its advantages over iPhone. But at least in the US, most of the other Android phones don't even bother to advertise anything distinct from the iPhone, other than the larger screens or 4G on Sprint. Most of the time, they are competing with each other, and since they all have (or could have) the same Android software. they wind up marketing based on price.

    • ChuckO

      You have to remember Apple has all the profit in smartphones. It's not about market share. Without the profit market share is meaningless (look at the PC market – especially HP, oh yeah and Dell fudging it's numbers by taking money from Intel, yikes). You can't innovate without profit and in Apples case it isn't all about the iPhone they also have the whole iOS platform that pays for innovation. In addition to how terrific it is to have Apple's iOS platform they are one company, the Android market is divided amongst multiple companies making much less per phone. How do they pay to innovate? There's no point in making commodity products for walmart shoppers.

      It also doesn't make sense for Apple to panic as in the very near future in the US additional carriers are going to converge on technology opening up more market for the iPhone and anything else Apple can collaborate with the carriers on.

  • Jeffrey

    Apple's iPhone was approximately $600 in 2007. Three years later and it's still $600. Rather than compete on price, Apple innovates and provides more customer utility for the same price. This enables Apple to maintain margins. Intel has always done this with microprocessors enabling them to have fantastic gross margins. The naysayers will continue to expect Apple's margins to compress. They will continue to be wrong.

  • Iphoned

    "Apple’s iPhone was approximately $600 in 2007. Three years later and it’s still $600"

    Up until just 4 months ago iPhone never had competition that's blown right past it like now. I don't know if this will lead to a price cut (certainly not until they can meet demand), but it is plain to see that the landscape just changed drastically.

  • Iphoned

    On the other hand, if the best Samsung can do us $1k for the iPad competitor, iPad margins are safe
    http://www.tomsguide.com/us/Galaxy-Tab-Pricing-Fr

  • Iphoned

    My guess is that there is no way Apple can sustain current iPhone profit margins in the face of the obviously-successful competition. I narrowly define sucres here as being able to take market share. They just won't allow iPhone to slide to Mac-like share which is surely where it is heading based on the current trends.

    The only way to do that is to close the huge price gap that exists today vs. competition.

    Now surely they maintain the best margins in the industry, but the 34% net margins on iPhones aren't likely to be sustainable.

    • yowsers

      I hear you on the narrowly defined metric of success as taking market share. I'm not sure that market share has ever been Apple's primary goal.

      The iPod product line's obscene 70% share would seem to be Exhibit A in an argument against that. But the sense I get is that while Apple certainly doesn't mind market share, it's not a primary or secondary driver for them the way it is for every other industry exec with an MBA.

      I haven't checked Android-device prices for comparison (I have no interest in buying one), but I had the impression that the competition hasn't been able to match Apple's build quality, integration, hardware specs (gigs), software, ecosystem, and can't match their price points or efficiencies of scale, either (except in distribution channels — Nokia and others do rule there…)

      Sure — you can list the specs and features for the most recent hot Android device, but the reality of the overall product (to me) is that it doesn't match the iPhone in specs, COGS or price. We can debate that point, no doubt.

      I may have that wrong — as I said, I haven't done a comparison for the phones. The last price comparison I did was for PCs v Mac back in 2006 and 2007, and found Macs actually cheaper than similarly spec'd PCs over the expected life of the product — quite a shock to me coming from PC world at the time and burdened with all that received wisdom of "Macs are more expensive".

      Anyway, returning to your point, I think Apple can maintain margins, and that market share (+/-) will not really change their game. I get the sense they're not playing by the same understanding or rules as the MBA-toting execs do. They'll follow a game plan similar to the iPod progression.

    • http://www.asymco.com asymco

      My own model of Apple's income sheet does forecast a decrease in ASP but I don't consider it a result of competition. Apple will lower pricing in order to expand the platform to more users. Margins will be preserved through 2013.

      Also as a counterpoint to your inevitability of margin compression consider RIM's margins.

      http://www.asymco.com/2010/08/13/phone-incumbents

      Even though they're outclassed on every front their margins have held pretty steady and their volumes continue to grow.

      http://www.asymco.com/2010/08/09/visualizing-the-

    • http://www.asymco.com asymco

      Your comment prompted me to dig into the data and it's posted here:

      http://www.asymco.com/2010/09/07/will-apple-need-