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iPad-Killers Take Aim at the Tablet PC Market

2010/10/04 | By Steve Chuang

Since the debut of the iPad earlier this year, Apple Inc. has dominated the tablet PC market and raised global awareness of the huge business potential of the market. The potential has not been lost on other top-caliber high-tech companies, who are racing now to come up with their own tablet PC "iPad-killers."

Before the iPad hit the market, industry insiders generally derided the device as just "an iPhone on steroids." One of iPad's drawbacks that drew the critics' scorn was poor integration with other software, like Adobe Flash, which they thought made the device ill-suited for business and professional users.

What the critics seem to have forgotten, though, is the power of growing army of Apple-maniacs, who quickly embraced the new device. And there is a lot to love: a revolutionary touch screen, the Apple A4 1GHz processor, Bluetooth support, iPhone application software, and a 10-hour battery life to name a few user-winning features.

According to Apple's financial statements released in mid-July, the company sold 3.27 million iPads worldwide in the second quarter of this year alone, outstripping total sales of all e-book readers in 2009. So far, the revolutionary tablet PC has received effusive praise from global market observers and survey institutes, with Goldman Sachs and iSuppli sharply raising their iPad sales projection to 15.2 million units and 12.9 million units, respectively, for the whole year.

Topology Research Institute (TRI), an Apple watcher, projects iPads to account for 70% of global tablet PC shipment of 37 million units in 2011 and help fuel demand for tablet PCs overall. Demand for such devices is expected to hit 130 million units by 2015, or 34%, of total notebook PC shipments expected that year. There is little question that Apple has given a huge boost to the tablet PC market.

Although Apple has swiftly taken the lead in this surging segment of iPad, TRI expects a few so-called "iPad-killer devices" to shake up the status quo.

Smartphones vs. the iPad
Among the best expectable alternative to iPad, TRI opines, are smartphones, mainly because the next-generation handsets, with 3G mobile communications commonly used worldwide, have enjoyed explosive popularity with functional similarity to tablet PCs.

Gartner figures that 314.7 million handsets of all types were sold during the first quarter of this year, marking a 17% increase from the same quarter of last year. Smartphones accounted for 54.3 million units of the total, a 49% increase.

Sales of smartphones grew by nearly 50% to 61.649 million units worldwide in the second quarter from just over 40 million units shipped a year earlier, with growth led by Android phones, according to Gartner's latest report.

Global Smartphone Sales by Operating Systems

Operating System

Units Sold in Q2, 2010

Market Share

Units Sold in Q2, 2009

Market Share

Symbian

25.386

41.2%

20.880

51.0%

RIM

11.228

18.2%

7.782

19.0%

Android

10.606

17.2%

0.755

1.8%

iOS

8.743

14.2%

5.325

13.0%

Microsoft Windows Mobile

3.096

5.0%

3.829

9.3%

Linux

1.503

2.4%

1.901

4.6%

Other Operating Systems

1.084

1.8%

0.497

1.2%

Total

61.649

100.0%

40.971

100.0%

Unit: Millions of units
Source: Gartner

Also, Frost & Sullivan forecasts that sales of the devices will increase to 477 million units to account for almost half of the total handset sales in Asia Pacific in 2015. The scale of related value-added services in the region is also expected to boom 28-fold to US$38 billion in the year from 2009

Noteworthily, sales of Android phones have surged to displace the iPhone as the world's No. 3 smartphone platform. As an open development platform, Android allows smartphone makers and application software developers more economical development costs, boosting the popularity of Android models. Considering Android's impressively rapid growth and functional similarity, TRI notes that among smartphones, Android models are the most likely to become the iPad killers.

E-book Reader Counterstrike
The iPad has quickly shaken up the e-book reader market with its large color touch-screen, easy operation interface and unmatchable brand recognition with consumers. Leading market incumbents, including U.S.-based Amazon and China's Hanvon, will be forced to develop better models to regain market share ceded to Apple presently, according to TRI.

To beat back the iPad, Amazon is allegedly developing an Android tablet PC. Some insiders think that Amazon's Android tablet PC could become a competitor to the iPad by drawing on Amazon's Kindle e-book store and VoD (Video on Demand) services, which will make the device functionally comparable with the iPad.

Some vendors also plan to reinforce ties with publishers and application developers to better position their e-book readers in the competitive landscape. Taiwan-based Acer has teamed up with Germany's Libri.de to develop the LumiRead, slated for debut in the fourth quarter of this year. Asus has confirmed a partnership with Txtr and is scheduled to launch its Eee-Note in October. Both the Acer and Asus devices will be able to access online platforms for e-book content and value-added services.

However, iPad's foray into the segment for e-book readers has also brought about positive momentum into overall shipment growth. The world's leading booksellers, Barnes & Noble and Amazon, have both driven down the price of their e-book readers, mainly to compete with the iPad, and their shipments have surged as a result. Digitimes' report shows that shipments of Amazon's 9.7-inch Kindle DX, for example, tripled when the vendor cut the prices of the model to US$379 from US$489. Global shipments of such devices are expected to exceed 10 million units in 2010 as vendors continue to pull prices lower.

Challenges From Global IT Giants
The me-too envy stirred by the iPad's success means that Apple will be facing more and more market rivals, especially global IT giants like Intel, Microsoft and Google, who all have ideas to overturn Apple's cart.

Intel and Nokia merged their Maemo and Moblin platforms in February to launch MeeGo, an open software development platform based on Linux for mobile devices. Nokia CEO Olli-Pekka Kallasvuo confirmed the two firms' determination to take the lead in the mobile device market, saying "MeeGo will drive an even wider range of Internet computing and communication experiences for consumers, on new types of mobile devices . . . Simply put, MeeGo heralds a new era of mobile computing."

Google's Android 3.0 also has put considerable pressure on Apple, raising the specter that Android-based tablet PCs could do to the iPad what Android has done to the iPhone. Motorola, Verizon, and Google are reportedly developing an Android tablet PC with a 10.1-inch screen. Acer also has confirmed that it will offer an Android tablet PC soon.

Admitting that Apple has done an "interesting job" with the iPad, Microsoft's CEO Steve Ballmer said that his firm and hardware partners are developing several tablet PCs running on Windows 7 to make a comeback in the segment.

Emerging Chinese Players
In addition to the global giants, TRI analysts also indicated that the iPad's current invincibility might be challenged by emerging Chinese players, like Huawei and China Mobile, in the future. Their increasing capability and influence in the global industries of telecom equipment and mobile communications will help them gain ground to compete against Apple in the segment.

The key factor that TRI believes will enable Chinese companies to catch up and even run neck to neck with Apple is the hugeness of China's domestic market, which can give them an enormous consumer base to design, develop and nurture products to maturity. One example is China's QQ, which is functionally similar to Windows Messenger and the most popular online community software in China today. QQ's makers hope to expand its global influence with English versions.

China Mobile, one of China's top three telecom companies, is developing OMS in cooperation with local and foreign partners in the handset, telecom services and software industries, attesting to the firms' ability to draw on China's huge population to carve out a market niche.

TRI analysts note that Chinese companies are better poised than Apple to win over Chinese consumers if they cooperate and create a new segment with tablets running Chinese software.