Apple sees share of tablet market hit more than one-year high in 2Q12

Alex Wolfgram,16 August 2012

Two years after creating the market, Apple holds the top spot with tablets, with its global market share rising to nearly 70% in the second quarter, putting the company on pace to reclaim much of the dominance it surrendered in 2011, according to IHS.

Apple during the second quarter shipped 17 million iPad 2 and new iPad media tablets, up 44.1% from 11.8 million in the first quarter, according to the HIS. This industry-leading increase in shipments translated into a market share gain of 11.5 percentage points, as Apple's second-quarter global tablet share climbed to 69.6%, up from 58.1% in the first quarter.

This marks a five-quarter high for Apple's tablet market share. The last time Apple accounted for such a large portion of the tablet was during the first quarter of 2011 when it had a 70% share.

"Apple is making all the right moves to rebuild its dominant position in the tablet space," said tablet researcher Rhoda Alexander at IHS. "The company is pushing visual performance with the new iPad, while providing value customers with a lower-priced alternative, the iPad 2. With the expected entrance of the 7-inch version of the iPad in September, Apple is sending a clear message that it plans to dominate this market over the long term. Apple's major media tablet rivals, Google and Microsoft, hope to challenge Apple in the second half of the year, but will be facing headwinds with no sign that the market leader is backing off of its aggressive strategy in the market."

New entrants add spice

"A major component of Apple's success to date is the company's well-developed ecosystem of content and applications it had in place before entering the tablet market, and its absolute control of the hardware, software and operating system," Alexander noted. "When a customer buys a tablet, what he or she is really doing is purchasing a key to that ecosystem, not just a piece of hardware."

Competitors have found it very difficult to duplicate Apple's approach. This, however, has left an obvious opening for 2012's newest market entrants: Google with the Nexus 7, and Microsoft with its Surface products.

Both firms have invested heavily in ecosystem development of their own during the past several years. While this investment benefits the Android and Windows OEM partners of both companies, it is not surprising to see Google and Microsoft, respectively, test the waters with tablets of their own, especially given Apple's prolonged stranglehold on the fast-growing market.

"It's possible that each of these vendors is entering the market intending to lead by example, rather than trying to be serious branded tablet competitors," Alexander said. "However, they both have the potential to end up as major players even if their original intent was only to demonstrate how it could be done. Microsoft in particular will be one to watch, with its existing Xbox gaming community on the consumer side and its operating-system dominance in business markets."

Looking beyond the hardware

In July of this year, Apple exceeded the 85 million mark for iPad tablets sold since the product's launch in April of 2010.

IHS research shows that satisfied users are likely to go back to the same brand for their next purchase. In all likelihood, Apple already has developed a solid future customer base, which will continue to strengthen barring a major stumble on an upcoming product release.

In contrast, Samsung, Apple's closest competitor, has shipped almost 13 million total tablets. Samsung was one of the first to enter the market after Apple, introducing its first Galaxy Tab in the fourth quarter of 2010. However, Samsung hasn't yet achieved the cumulative unit sales that Apple reached by Christmas of 2010.

One difficulty for players other than Apple has been in establishing a clear brand identity in the media tablet market. Without a distinctive brand identity, competitors are forced to battle on price, robbing them of the profit margin that fuels future product and ecosystem development. Google's entry-level US$199 price point exacerbates the price pressure across the Android tablet universe, just as Amazon's entry did in the fourth quarter of 2012. It remains to be seen at what price point Microsoft will enter.

"Tablets are becoming an increasingly important piece of the consumer electronics space," Alexander noted. "Vendors must understand that customers are not buying hardware, but that they are buying an experience. Users then want to carry that experience across multiple devices, creating an opening for vendors into a much larger sales opportunity than a single tablet."