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Apple’s iPad lead will quickly come under pressure from Google and Nokia

Apple’s headstart in the tablets market is giving the vendor a blissful honeymoon period in this market, where it has accounted for 95% of sales in th

By PETER WHITE

Published: 11 November, 2010

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Apple’s headstart in the tablets market is giving the vendor a blissful honeymoon period in this market, where it has accounted for 95% of sales in the third quarter, according to reports. Credible competitors will emerge for the holiday season, so its share will be squeezed in Q4 – but it will still gain two-thirds of sales, according to a forthcoming report from Rethink Technology Research.

In 2011, though, it faces the prospect of a Google attack, similar to that in smartphones, but this time riding on two operating systems – Android and the cloudbook platform, Chrome OS. First products running this new Google system are expected to debut before year end and will be closely followed by another OS optimized for tab-lets and the cloud (unlike iOS or Android) – the Nokia/Intel platform MeeGo, which has attracted the attention of influential carriers China Mobile and Telefonica.

Recent market studies reflect the huge success of Apple’s iPad launch, which sent many firms scurrying back to their drawing boards, delaying their own device releases to adjust to the trendsetter, and giving the Apple product a longer period of virtual monopoly. According to Strategy Analytics, tablet sales will reach 80 million in five years, from 4.2 million in the third quarter of 2010, when Apple took 95% share. Meanwhile, Juniper Research forecasts that annual shipments of tablets will reach 81 million by 2015 with Apple maintaining its lead for the medium term.

However this time of clear leadership will be far shorter for the iPad than the iPhone, which had competitors from day one, but none that really matched its appeal for a couple of years at least. Device makers have learned many lessons from the iPhone story, and will be quicker to catch up this time, or to offer a clearly different value proposition – as Samsung is already doing with the main early challenger, Galaxy Tab, which is not an iPad copycat but comes in a smaller, pocketable size and with a heavier focus on integrated content.

By the end of 2011 the number of vendors offering media tablets will rise from about 25 to about 200, although the end of the year will already see the start of some fall-out. Rethink’s forecast shows the iPad keeping its lead but with significant erosion of its share in the face of rising competition. There were already early signs of this in the third quarter of 2010, when iPad sales, though healthy at 4.19 million units (up 28% on the first quarter of availability), disappointed analysts. Apple cited component shortages but there was also the anticipation factor, as consumers waited to see what other brands had to offer.

Apple will remain the market leader throughout the period, because of its brand power, its control of its platform and its ability to innovate. However, its share will drop sharply once it has real competition in 2011, and it will end that year with less than 40% of the total by units (its revenue share will be higher as it will maintain some price premium and also has strong economies of scale). By 2014 its share will have stabilized around 20%, still well ahead of other players, none of which we expect to have more than 10% share on a consistent basis.

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