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Apple’s iPad Problem Could Overshadow Smartphone Decline

One of the biggest stories to come out of Apple’s latest quarterly earnings report was the third consecutive decline in iPhone sales. However, the revenue numbers for the iPad tell a very different story and forecast major tablet problems for Apple in the years ahead.

The report notes a drop of 6% in iPads sold but an overall revenue change of 0%. In essence, they sold less than they did in the previous quarter but ended up making roughly the same in revenue.

This quiet detail of the company’s latest earnings report is made possible because the average price of an iPad purchase has risen $26. This trend can very much be attributed to Apple’s new positioning on tablets.

Where once they were offering a tablet for everyone, they’re now firmly selling themselves at the high-end of the market – pitching themselves to power users and designers who stop just short of buying a full-blown MacBook.

Unfortunately, the longevity of this approach is already coming under scrutiny as a result of falling demand for tablets globally.

The IDC reported that worldwide shipment of tablets declining for the seventh quarter in a row as of August.

The reason for this is relatively straightforward: most users already own one. Telsyte found that two in three Australians have access to a tablet. Although they predict Apple will remain a market leader for the next two years, beyond that, there’s a lot of important questions to be asked.

In terms of market share, 21 percent of media tablet sales were Windows-based devices, 35 percent were Android-based, and 44 percent used iOS – with Telsyte expecting sales of Windows-based tablets to exceed Android-based units within the next 18 months.

While Telsyte noted Apple holds an impressive retention rate of 80 per cent, it’s difficult to envision how the company can iterate and innovate on their current iPad lineup beyond annual component improvements.

Most of the competition Apple now faces in the high-end of the market comes from 2-in-1 tablets but it’s unclear where they could take the iPad without eating into the customer base already catered to by their MacBooks.

Some have speculated that the company might look to merge the iPad and MacBook categories into a single product range. However, consolidating these two categories into a single revenue stream reads as a remarkably out-of-character for the company.

The iPad was seen by many as a parting gift from Steve Jobs that gave the Apple incredible commercial momentum that carried them through the years following his death. However, if they can’t chart a new course for the product, being squeezed out of the category they pioneered is a very real possibility.

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