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Apple's iPad Shipments Dampened by iPhone 4S Launch

The rollout of Apple's iPhone 4S in October generated intense competition for Apple purchasers' disposable income, said analyst Rose Alexander. This did "more to limit iPad shipment growth than competition from the Kindle Fire and other media tablets," she said. Apple shipped 15.4 million iPads last quarter, but the iPad's market share slipped. Apple shipped 15.4 million iPads during last year's fourth quarter -- a 39 percent rise from the prior three months. Nevertheless, Apple's share of the global tablet  market slipped seven percentage points, to 57 percent, "as many loyal Apple customers devoted their dollars to shiny new alternatives," said Rhoda Alexander, senior manager of tablet and monitor research at IHS iSuppli.
One of the drivers of Apple's share decline was Amazon's 3.9 million Kindle Fire tablet shipments. However, Alexander believes the launch of Apple's new iPhone 4S may have dampened iPad sales in last year's seasonally strong fourth quarter.

"The primary alternative wasn't the Kindle Fire -- which debuted to solid sales in the fourth quarter -- but Apple's own iPhone 4S smartphone," Alexander said.

The rollout of the iPhone 4S in October generated intense competition for Apple purchasers' disposable income, Alexander said. This did "more to limit iPad shipment growth than competition from the Kindle Fire and other media tablets."

Creating Market Chaos

According to IHS, the launch of value-priced tablets in the final three months of 2011 created chaos across the Android  tablet marketplace. Among other things, it forced competitors to slash pricing in order to clear inventory, the firm's analysts said.

The surge in non-iPad shipments "was achieved at considerable financial cost, with sharp price reductions across most of the competing Android tablets and actual product giveaways from a number of vendors as part of promotional efforts for other electronic products," Alexander said.

Samsung Electronics boosted its fourth-quarter tablet sales sequentially by shipping an extra 290,000 units, but it was not enough to overcome the "respectable start" for Amazon's Kindle Fire, Alexander said. As a result, Samsung fell to third place with an 8 percent share of the global tablet market during the fourth quarter.

By contrast, Amazon's Kindle Fire rocketed to second place behind Apple's iPad with a 14.3 percent market share in the final quarter of 2011. The online retail giant's Kindle Fire shipments were in line with an early December IHS forecast of 3.9 million units.

"However, the long-term viability of the product will hinge on the success of Amazon's business  gamble, which depends on tablet sales driving substantial new online merchandise sales at Amazon.com in order to attain profitability," Alexander said.

Apple's Strategic Options

Though Alexander said Amazon's fourth-quarter tablet shipments represented "a respectable start for the Fire," the company's rivals are already prepping their own low-priced market offerings. Samsung Electronics, for example, will release a 7-inch Galaxy Tab 2 model next month.

Still, some industry analysts believe that Samsung needs to do more than simply flesh out the low end of its tablet product portfolio.

"They are trying to become cheaper because of competition [but] it would be a lot better if they worked on the ecosystem rather than the price," noted Francisco Jeronimo, a research manager for European mobile  devices at IDC.

Given that the Kindle Fire is currently a North-America-centric device, Samsung will not face competition from Amazon when it launches the Galaxy Tab 2 in the United Kingdom in March. "The U.K. is usually the market" in which new products debut for the European region, Jeronimo noted.

Alexander said it was unlikely Amazon would attempt to expand outside North America right away.

"There are opportunities [for Amazon's Kindle Fire] to go global but there is a lot of ground work to accomplish before any major international launches, according to our sources," she said in an e-mail Thursday.

However, Samsung's new low price-point offering may come under renewed pressure when Apple rolls out its next iPad version in the second quarter of this year. Among other things, Apple could continue to sell the original iPad and iPad 2 at lower prices -- a strategy it has already rolled out for its iPhone lineup -- or perhaps even unveil a new 7-inch model at a lower price.