The iPad was launched in January of 2010 and has made a strong impression on the computer world with solid numbers in sales for Apple. Far from announcing any future products for the tablet market, Intel and Microsoft have had a lackadaisical attitude towards the iPad so far. The most obvious reason for this seems to be that both Microsoft and Intel consider the tablet as a marginal market when compared to their traditional sources of income – hardware and software for desktops, laptops and servers.
According to market research by Barclays, tablet markets are expected to achieve 15 million units in sales in 2010 and the number will grow to 28 million for the next year. The Apple iPad is heading towards 10 million units in sales by the end of 2010 and in 2011, 18-25 million units. Clearly, Apple has a major chunk of the tablet market so far. A slew of iPad competitors have hit the market or expected to hit the market soon – the Dell Streak, Blackberry Playbook, tablets from Samsung, Motorola and Nokia; Cisco’s enterprise tablet and Hewlett Packard with a touchscreen tablet based on Palm’s webOS. These tablets might bite into Apple’s share of the tablet market but they all have two things in common: They run on ARM-based processors and they all use non-Windows operating systems (Apple iOS, Google Android, or Palm WebOS). None of them use the services of either Intel or Windows. As the popularity of tablets grows, these two industry tech giants stand to lose the most.
Another reason for Microsoft and Intel’s lackluster response is that both of them are not ready to compete in the tablet market. The chips Intel makes cannot compete with ARM with respect to tablets because their power consumption is higher and they are more expensive. Microsoft Windows is not suitable for the tablet because it’s too slow and big and only recently has Microsoft come up with a capable Mobile OS – Windows Phone 7. Windows Phone 7 first needs to prove its worth in the mobile market before being considered for the tablet. Meansing that every tablet sold means loss in revenue for Intel and Microsoft if we assume that tablets cannibalize laptop sales.
There are three views of the cannibalization theory. The first view considers the cost perspective. A customer with limited funds will always opt for the tablet PC. The second view considers the long-term scenario. When the netbooks were launched, they were expected to significantly diminish the notebook market but a couple of years on, we see that the netbooks have created a market of their own and customers sometimes keep both a netbook and notebook. The same trend may be followed by the iPad and Intel and Microsoft will not suffer much harm. The third view considers the obvious possibility that few people maintain two devices and thus the iPad will damage the notebook and desktop markets.
Only time will tell if Microsoft and Intel are right or wrong in their decision to not enter the tablet market. The silver lining is that keeping the entire PC market in view, the phenomenal growth rate of the iPad is counterbalanced to a certain extent by the growth rate of the PC market alone – 367 million units in 2010 compared to 306 million in 2009, a 22 percent increase. Still, Microsoft and Intel should be concerned about the future and should focus on adapting to the tablet market.