iPhone, iPad demand 'softening'; market saturation to blame?

iPhone, iPad demand 'softening'; market saturation to blame?

Summary: With an expected relaunch of the iPad in just over a month's time, according to rumors and reports, Apple may have finally hit a saturation brick wall in the tablet market.

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TOPICS: Apple
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Stormy clouds are brewing over Cupertino, Calif.-based Apple after three Citigroup analysts reported that they believe demand in the company's main profit-driving divisions, the iPhone and iPad, are "softening."

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Has Apple finally hit an iPad saturation point? (Credit: CNET)

Citi analysts Glen Yeung, Jim Suva and Walter H. Pritchard reduced their already-below estimates for the company's second quarter due to the indications of a reduced demand for components by suppliers.

This, they say, adds to their "existing concerns that end-demand for [full-sized] iPad and iPhone 5 in particular is softening."

In a nutshell, Citi found evidence that there is reduced demand from Apple's suppliers for iPhone 5 and full-sized iPad components, meaning that consumer demand is shrinking. For the current March quarter, Citi is estimating Apple will sell 34 million iPhones, down from 35 million, and during the June quarter the consensus is down to 25 million from 32 million. 

For the iPad, however, the numbers are starting to look on the dire side. In the U.S. and Japanese market, full-sized iPad tablet sales are in decline by more than 10 percent year-over-year in the fourth quarter of 2012.

Why? One of two reasons, if not both. The market is saturated with iPhones and iPads, but also the product launch cycle is about to kick back into gear. During March and April, Apple watchers get twitchy. It could be any day now when Apple will likely send out invitations to the press to come and see their new products for the first time. 

Here's the kicker. iPhones are high profit devices for Apple—as are iPads—but iPhones have a higher turnover rate for upgrades. Think about it: you're more likely to upgrade your iPhone than your iPad. Smartphones continue to reign over the tablet space in the post-PC market because they're in your pocket day in and day out. And while everyone needs a smartphone in this day and age, tablets are still a luxury, non-essential device. 

For the niche (albeit significantly large) group of the market that bought a tablet, Apple still reigns at the top of the tablet food chain. But tablet demand is still a distance behind smartphone uptake. 

Only in January, IDC said that during the fourth quarter of 2012, the worldwide tablet market reached a record high to 51.4 million shipments, up by 75.3 percent year on year. But that's just one fiscal quarter. Rough estimates show that's more than 200 million tablets during the fiscal year.

According to the research firm, Apple took just shy of a quarter of that total quarterly figure with 22.9 million units, a 48 percent year-on-year growth. Samsung, by comparison, saw a massive 263 percent year-on-year hike but only managed to sell 7.9 million tablets during the fourth quarter.

While Samsung's tablet growth is remarkable, its shipment levels are still close to the ground. Apple's growth is slower because of the vast number more iPads the company has out on the market.

Samsung also has a range of different sized devices, whereas Apple has two: the regular-sized 9.7-inch iPad and the 7.9-inch iPad mini. The analysts warn that the "iPad Mini is undoubtedly cannibalizing 10-inch iPad sales," while "product transitions in 7-inch models may be contributing to reduced production in [the June quarter]," which they  "see [as a] risk to consensus estimates."

Apple can only do so much. Incremental features will tick over the product line for only so long, whereas iPhone owners are a little less fazed by the lack of major upgrades. That said, while the company's iPhone business is booming, numerous reports and analysts suggest iPhone 5 sales have been lower than previous iterations of the smartphone, despite a 'major' design change and feature set—such as a 4-inch display and 4G LTE networking. This suggests that a similar apathy towards iPad upgrades may be slowly spreading to Apple's smartphone user base.

Apple is expected to launch the so-called iPhone 5S in August, while new iPads could be revealed next month, according to sister site CNET. Yeung et al also believe a iPad mini with Retina display will be on the cards, along with a non-Retina version of the petite tablet.

Topic: Apple

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44 comments
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  • Maybe

    it's just that the kool aide wore off...
    timspublic1@...
    • I thought it's the post-PC era

      Softening, hoho. Eat that iDayDreamers.
      LBiege
      • post ipad era

        post pc era was yesterday.
        it is now the post ipad era.
        warboat
  • This is news? It's called the "normal business cycle"

    We have now entered the Post-Tablet era: "For the iPad, however, the numbers are starting to look on the dire side."
    MustangGTX
    • I don't know, i'm entering the post smartphone era...

      It started with my nexus 7 last summer; as soon as I got it, it took over my mobile duties (so long as I had wi-fi) and I used my iPhone less and less.

      I got myself a mini (sue me) back end of november that had 4g and since then my phone usage has really fallen!

      I'll be the first to admit I'm not the norm, but my phones (personal: moto razr maxx, work:iPhone 4s) really do now just do basic internetting and phone duties. To be completely honest, i don't see myself replacing either with a similarly priced phone in the future... Maybe nexus 4 like, or more likely a sony xperia (any one in the $2-300 price zone.

      Personally I've been trying to work out if it's just worth waiting until next year and seeing how the alternatives develop.

      By contrast I do keep an eye on the tablet market. Whilst I have absolutely no interest in a mini retina, I could be swayed by an adroid update that lets me back up my apps...
      MarknWill
  • People dreamed about double digits growth for all the eternity

    It's not going to happen.
    AleMartin
    • Facebook effect

      Yeah, kinda the way investors in the Facebook IPO were under the delusion that Facebook still had a lot of growth left when it already boasted one out of every 6 human beings on earth as an account holder.

      Eventually you get to a point where the market stabilizes and you focus on serving the slower moving replacement market more so than first time buyers.
      dsf3g
  • iPhone, iPad demand 'softening'; market saturation to blame?

    Market saturation is partly to blame. The other part is that its a terrible form factor and only works in certain situations. People are leaving the tablets behind at home for them to collect dust on the night stand. I called this one therefore I'll go ahead and give kudos to myself.

    Kudos Me!
    Loverock-Davidson
    • I agree with you it is a terrible form factor

      Why wife wanted an iPad until she realized what it WASN'T capable of and she purchased herself a laptop.
      MustangGTX
    • Are you saying tablet usage is decreasing?!

      I have serious doubts about that...
      AleMartin
      • Blind

        The "tablets are so horrible, people will soon go back to laptops" crowd appears to have convinced only themselves of this delusion. I for one see no evidence of a return to notebooks, and I can probably count 10 tablets being used in public places (Starbucks, libraries, parents waiting around at their kids' swim practice) for every notebook computer I see.
        dsf3g
    • Leaving Tablets at home

      Being left behind is true enough of Android and Windows tablets since iPads have 80% of all mobile web traffic. I take my iPad with me everywhere and I suspect most do. And this article is dead wrong. As someone said a "normal business cycle" of the calm before the new upgraded iPad and iPhone storm. People, anal-ysts and commentators are so disingenuously & web baitingly happy not to mention premature writing Apple's epitaph. Makes me laugh. Wishful thinking does not equal reality.
      pgentry53
      • Not scientific but everyone I know

        who own tablets (almost exclusively iPads) take them just about everywhere. Of course there is going to be some up and down in the market through the year and at some point saturation but what does this article really tell us? Doesn't tell us anything and reminds me of some many other articles basically claiming the exact same things for the December quarter just before Apple reported yet again record breaking sales figures. In other words it's all meaningless.
        non-biased
  • Look at the title - how soft it is

    If this was Windows or Nokia, Zack would write "Windows / Nokia's furture not so good".

    Apple iOS is a one trick poney, its game over for apple.
    Owlll1net
    • So far, iOS has been a three trick pony.

      1 Trick: the iPhone (a bigger business than all of MS).
      2 Trick: the iPad (By the end of the year, a bigger business than all of Google).
      3a Trick: Apple TV/iPod Touch. (I have trouble thinking a $500,000,000 to $1,00,000,000/quarter business is a bad thing).
      3b Trick. iTMS. iTMS is a multi billion dollar business with tons of content sales that MS could only dream about. Driven heavily by those above iOS devices.

      But why tell the truth when a lie suits your hatred better?
      Bruizer
      • have mercy

        It is not hatred, it's what is written in those guys job description. After all, they need to comply with the requirements of their employer, or no check next week.
        danbi
        • Or maybe...

          A stock holder? Need to help the stock to go up coz it's going down
          GT15
      • Simple Business and Math for the fanboys

        In business future is growth potential. Apple growth will be calculated by comparing to either last year this time and/or last quarter. If their sales are less (even if they are $X,000,000,000) their growth is negative. Which means growth potential < none. No mater how many tricks there pony has had, if it doesn't do another one soon there will be problems.
        alex_darkness
    • Not as soft

      As Microsoft.
      danbi
    • Game over?

      Even if the analyists are correct, Apple will still have sales numbers that make every almost other company in the world envious.

      Likewise if Apple sales do cool down, that does not mean it will result in higher sales for any other company.
      Emacho