Technology has had two major epochs since the early 1980s, informally called the Digital Revolution and the Information Age.
They loosely span 30 years, and defining factors of these two eras overlap in some places. In other places, we’re still feeling the changes.
One of these still-changing areas is in what we used to call “personal computing,” or computer use for non-work purposes.
PCs are still a major consumer item, but their cachet has been supplanted by mobile devices like tablets and smartphones.
This has happened because of changes to user interfaces, the invention of new methods of creating and accessing data, and the availability of new communicative media.
Tasks people used to do on their Internet-connected home computers during the Digital Revolution are now being done more quickly and easily on mobile devices in the Information Age.
The thing is, since tablets and smartphones began taking over, we haven’t really had enough data about tablet longevity to make predictions about macro market trends and how much they’d eat into PC sales.
To put it more simply, we didn’t know how long people would use their tablets before replacing them.
They’re not like smartphones. These, generally speaking, are purchased on a two-year contract, and subscribers get a subsidy on a new phone if they renew their contract.
This has forced that market into very predictable cycles.
Tablets, on the other hand, aren’t as strict in their lifespan. Apple (NASDAQ: AAPL) dictates when consumers will be able to upgrade to the newest iPad, but since there are few major changes between versions, upgrading isn’t an urgent, time-sensitive affair. Other tablets can last for years without needing an upgrade.
Now that tablets have been popular for about five years, the trends have become clearer.
Because of this, market research is now showing a major slowdown in tablet shipments.
The Data
Market Research firm IDC has predicted a “massive deceleration” in tablet shipments for the full year 2014.
It’s dramatic, to say the least.
In 2013, tablet shipments grew by 52.5%.
In 2014, they will have grown by just 7.2%.
Next year, it could be even less.
Apple’s iPad will see its first-ever annual decline in sales, dropping 12.7%, while Android-powered tablets such as those from Samsung, Sony, Asus, and so forth will increase by 16%.
In 2009, mobile tablets began to eat into the market share of laptop and notebook computers. People began buying and using them for all of their daily computing tasks. In the time since then, it’s become increasingly clear that tablets have a longer lifespan than a smartphone but a shorter one than a notebook computer.
Instead of using their tablets for two years, consumers are using them for three to four years before considering replacements.
“We believe the two major drivers for longer than expected tablet lifecycles are legacy software support for older products, especially within iOS, and the increased use of smartphones for a variety of computing tasks,” said IDC research director Ryan Reith.
Why is This Important?
A lot of casual observers will overlook the significance of this data.
But it’s important because IDC is talking about shipments, not sales.
Shipments are the manufacturers’ ways of showing how the market is functioning. They look at historical sales data and use them to formulate their shipment volume.
Obviously, they don’t want to produce and ship too many devices, because they’ll just get sent back if they’re unsold. This is an inefficiency they do not want. These companies want their shipment and sales figures to be very close to each other. This would mean they’re meeting demand without overproducing.
When these companies ramp down their shipment volume this much, they’re potentially sending lots of signals: maybe sales were much lower than they had expected, or maybe they don’t anticipate as high a demand for their products moving forward. Maybe the influx of low-cost tablets has chilled demand, or maybe the market is already approaching saturation.
Whatever it means, the initial tablet buying spree has clearly come to an end.
Even though those useless holiday gift-buying guides continue to say tablets like the iPad or Kindle Fire are “hot tech gifts” this year, that heat is rapidly fading.
With their three- to four-year lifecycles, this means a rebound in shipments won’t come for another year, and even then, it won’t be that big of a gain.
Tailor your portfolio accordingly.
Good Investing,
Tim Conneally
For the last seven years, Tim Conneally has covered the world of mobile and wireless technology, enterprise software, network hardware, and next generation consumer technology. Tim has previously written for long-running software news outlet Betanews and for financial media powerhouse Forbes.
