Global Tablet Revenue to Grow to $70 bln by 2014

RBC Capital Markets expects tablet market to reach 185 million units in calendar 2014, up 83 percent compound annual growth rate (CAGR) from 17 million in calendar 2010. RBC Capital forecasts global tablet revenue to increase from $11 billion in calendar 2010 to nearly $70 billion in calendar 2014.

We expect Tablets to increase from 3 percent of total computing shipments in calendar 2010 to 12 percent in calendar 2014; we forecast tablets and smartphones to increase from 42 percent of total computing shipments in calendar 2010 to 64 percent in calendar 2014, said Mike Abramsky, an analyst at RBC Capital Markets.

Ignited by Apple Inc.'s iPad, tablets to us represent a distinct new mobile computing category, significantly expanding the computing market. Further, with one billion mobile devices (tablets, smartphones, other) expected to be shipped by calendar 2014, the mobile Operating System (OS) is catapulting to prominence. All tablets, however, aren’t created equal; too many contenders are setting up for a pending shakeout, said Abramsky.

Abramsky expects global tablets users to increase from 20 million in calendar 2010, or 1.5 percent of global internet users, to over 400 million in calendar 2014, up 112 percent CAGR, equating to 19 percent of global internet users.

Abramsky's global tablets users forecast is based on: the larger addressable market for the tablet computing experience, transcending geography, language, demographics; Tablet versus PC affordability (less than $300); the secular shift to mobile computing (The Next Wave, with 3G/4G estimated 80 percent of tablets by calendar 2014); the rise of the 'Touch n Sync' computing culture started by Apple; Tablets as a mobile thin client for cloud computing; and Distribution advantages (retail/online + carrier channels greater than retail/online distribution).

Abramsky said the rapid growth in tablet shipments is driven by the increased affordability of tablets (versus PCs), consumers’ re-allocation of spending to tablets from discrete consumer electronics (e.g. GPS devices, MP3 players, etc.), increasing mobility of consumer/business computing , and some replacement of traditional PCs with tablets (nominal near term, larger longer term). Abramsky said his forecast assumes a three-year replacement cycle.

Out of the 17 million tablets shipped in calendar 2010, Abramsky estimates consumers purchased over 95 percent (16 million). Abramsky defines consumer tablet shipments as those tablets that are purchased by users for their own personal use and are not reimbursed by their enterprise.

Abramsky forecasts the consumer tablet opportunity to expand to 113 million units in calendar 2014 (61 percent of tablets), up 63 percent CAGR. Abramsky expects consumer tablets to rise from 4 percent of consumer computer shipments in calendar 2010 to 10 percent in calendar 2014, as consumers increasingly utilize tablets for basic computing tasks instead of PCs.

Abramsky said the catalysts for consumer tablet adoption include: Broader global distribution of consumer tablets; Affordable price points; Rising availability of optimized tablet content (e-books, magazines, apps, software); and Widespread support uncompromised tablet browsing experience (HTM5, Adobe Flash).

Tablets and smartphones shipments are expected to exceed PC shipments by calendar 2012 and reach one billion units by calendar 2014 (64 percent of total computers). The rising prominence of the mobile OS and platforms -- optimized for the mobile and cloud experience -- will intensify the fierce battle for leadership amongst smartphones, PCs, chips, software, developers, and content vendor, said Abramsky.

While Apple’s iPad may continue to set the bar high for experience, Abramsky expects Android to dominate (40 percent share Tablets by 2014), given its broader support from OEMs and carriers and expected budget-priced Android Tablets from Asia. Too many vendors entering the market sets up for a pending shakeout.

After Apple’s expected continued leadership, Abramsky sees RIM, HTC, Motorola, Samsung, and HP as strong contenders. Microsoft may face challenges, as might many less-differentiated ‘NAAT’ (Not Another Android Tablet) vendors, some of whom may exit the market.