Will the Apple iPad continue to be the catalyst of growth or is there a growing commercial apathy towards the tablet? iPads represented less than 10% of total company’s 2016 sales and in the last two quarters of 2017 they have been around 7%. The iPad is seven years old and tablets in general seem to be losing ground.
Many people are unaware that Apple released a new inexpensive 9.7 iPad a few months ago and it is currently retailing for $329, which is 36% cheaper than the most inexpensive iPad ever marketed . This device has a two pronged strategy. The first is to revitalize their declining product category and compete in the lower-end market. The second is to drive revenue towards the App Store and Apple Music, this was evident in this week’s announcement that Apple had adopted Paypal to make purchases.
The cheap iPad is appealing towards two major demographics; existing iPad users and long-time PC users. According to some estimates, there are 100 million users still using older iPads (iPad 1, iPad 2, iPad 3, iPad 4, iPad mini). A significant portion of these users are using devices that don’t even support the latest iOS release. The fact that one hundred million people are still using older iPads demonstrates that the product provides value. Apple is also confident that users will see the significant improvement between the latest iPads and models from five to seven years ago. As for PC users, Apple thinks the iPad Pro line is capable of handling the vast majority of tasks currently given to laptops. Apple looks at the iPad Pro line, which includes Apple Pencil and Smart Keyboard, as a better solution for consumers than even the Mac.
We will not know if the new affordable iPad is going to be a hit or miss, until Apple announces their 3rd quarter revenues. I surmise that we have hit peak iPad and people are unwilling to upgrade their older devices.
- Worldwide, sales of all tablets fell 15.6 percent in 2016, according to research firm IDC.
- iPad sales have declined for 12 consecutive quarters. After topping out 74M units in 1Q14, the annualized iPad sales rate has declined by 42% to 43M units.
- Apple continues to brag about how happy people are with their iPads, the growing sales in countries like China and India and the company’s leading market share in tablets. All of that may be true, but few companies would have the gall to boast about being No. 1 in a shrinking industry.
- iPad mini unit sales have declined 70% after peaking in 4Q13 and 1Q14. The product’s value proposition has been permanently reduced due to larger iPhones. Apple has clearly experienced Peak iPad Mini. It’s not that the iPad mini form factor is going away, but rather that it will play a smaller role going forward.