Are tablets in danger of fading into irrelevance

Tablets were supposed to be the next great growth category for consumer electronics and personal computer companies - and they were for a few years.  However, several recent research reports and Apple's financial results have cast doubt on the category's ongoing growth.  Some analysts are even predicting iPad sales will decline this year.  So what's the deal - have tablets just hit a speed bump, or is something more significant going on?

In March research firm IDC issued a press release with this headline: 'Worldwide Tablet Growth Forecast to Slow as New and Replacement Purchases in Mature Markets Begin to Level Off, According to IDC'.  A few weeks later Apple released its financial results, which revealed iPad unit sales declined 16% year-over-year.  CEO Tim Cook partially blamed the decline on inventory adjustments, but sales would have declined anyway.  It's clear that iPad sales are flattening, and the tablet category overall is growing much slower than it was a few quarters ago.  Even $100 Android tablets aren't keeping growth rates high.

Benedict Evans from VC firm Andreessen Horowitz has a great blog post where he argues that tablets and PC's are part of one large-screen category and smartphones are in their own mobile category.  I believe he's onto something and my own personal usage mirrors this.  For most people the smartphone is the most important device.  It's the device we carry with us everywhere we go, stay connected, and get little bits of work done.  Most people get a new one every two years when they renew their wireless contract.  It's the only device some small segment of the population will need, but most of us need a large-screen device as well.  For some people this will be a laptop or desktop computer with a mouse and keyboard, for other people it will be a tablet.  When tablets were launched they were a bit of a novelty and people bought them and used their PC's less often.  This is how I initially used my iPads.

Now that the novelty of tablets is wearing off and smartphone screens are getting much larger I think people are reconsidering if they really need all three devices and whether a tablet or a PC is the best large-screen device for them.  I can't get my work done without a laptop, and I can't imagine not having a smartphone.  When it comes time for me to upgrade my computing devices I probably won't be getting another tablet (unless it's a Nexus 7 or something affordable to play around with).

My current tablet of choice is the iPad Mini.  I like how portable it is and that I can hold it in one hand when reading or web browsing.  A while ago I realized that I don't actually want a small tablet, I want a big smartphone.  I don't need two different devices with similar capabilities that are so close in size.  There were times over the last year when I didn't have a phone and actually used my cellular iPad Mini more like a smartphone than a tablet, taking it with me everywhere I go and using it for texting and calling.  I now have a 5" Nexus 5 smartphone, and would definitely like something larger.

If other people are thinking this way, it could explain the slowdown in tablet sales.  We can't look at buyer behavior of tablets alone, we have to consider it along with computers.  I've observed that most people replace their computers when they need to, not when a new hot product comes out that they want, thus holding onto their computers much longer than their smartphones.  The large-screen category as a whole is therefore smaller and lower-growth than the smartphone category.  It's just not fair to think of tablets as mobile devices anymore, and expecting Apple or Samsung to keep up their astronomical growth rates is foolish.

I'm anxiously awaiting the rumored 5.5" iPhone 6.  This is a crucial product for Apple for several reasons.  If tablets really are more like computers than smartphones, a larger iPhone 6 will tremendously help Apple financially.  There is a larger and faster growing market for smartphones, they carry a higher price and higher margins for Apple, and it's the most important computing device for many people.  They absolutely need to knock it out of the park.