Android Tablets Are Taking Off

A few months ago I wrote that Apple's (NASDAQ: AAPL  ) tablet crown was looking a little dented -- now it appears it may be falling apart. The latest numbers from Strategy Analytics show that Android's made huge gains against Apple's iOS over the past year, and it's showing no signs of slowing down.

In the second quarter of 2012, Apple shipped 17 million iPads, partly due to the successful launch of the iPad Retina. That helped bolster Apple's iOS tablet market share to 47.2%. But even after the launch of the iPad Mini later that year, Apple's market share has dropped to 28.3% at the end of this year's second quarter, with 14.6 million units shipped.

Apple iPad. Source: Apple.

Apple's drop has been Android's gain. Over the same period, Google's (NASDAQ: GOOGL  ) tablet OS jumped from 51.4% to a staggering 67%. Strategy Analytics said that Android's success is due to the success of Samsung, Amazon.com, and Google tablets. Overall, branded tablet shipments shot up 47% to 36.2 million units from 24.6 million a year earlier.

According to Q1 2013 data from IDC, Samsung is the No. 1 Android tablet vendor, followed by Asus -- which makes Google's Nexus tablets -- and then Amazon. Samsung easily beat the competition, shipping 8.8 million units compared to Asus' 2.7 million and Amazon's 1.8 million.

Not to be left out of the tablet conversation is Microsoft's (NASDAQ: MSFT  ) Surface tablets, which jumped to 4.5% OS market share this past quarter and 2.3% global shipment market share. Strategy Analytics believes that third-quarter shipments of the Surface could spike because of the recent price drop for Surface RT tablets. If that happens, investors should keep in mind that any significant growth for that quarter would likely be temporary compared to the steady gain of Android tablets.

Samsung Galaxy Tab 3 10.1-inch. Source: Samsung.

In the coming months, Apple is expected to launch updated versions of both the iPad and the iPad Mini, which could help boost market share. Apple is king when it comes to tablets larger than 8 inches, but according to NPD, two-thirds of tablets being sold in the first quarter were smaller than that size. Though Apple still commands a 30%-40% share of smaller tablets, a plethora of small Android tablets compete with the Mini and typically can be had for a much lower cost.

One of the bright spots for Apple is the coming release of iOS 7. The software is currently in its fourth version of beta for iPads, but when it launches this coming fall it could help tip the tablet scales back in Apple's favor. Customers who've been holding out on an iPad purchase may be more inclined to make a purchase once the new software is released.

iOS 7 will give Apple a much-needed operating system revamp in both style and substance. It may be enough to entice some consumers, but the real issue for Apple going forward will be how the next iPad and iPad Mini evolve. A Retina Mini seems like an obvious product, but some have speculated that Apple's afraid it could eat into traditional iPad sales. Even if iOS 7 is a hit and pushes iPad sales up temporarily, Apple would be unwise to think the new OS is the only answer to its slowing iPad sales. I hate to join the chorus and say that Apple needs to innovate, but as cheap Android tablets flood the market, it seems that innovation is the only way for the company to make major gains.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 31, 2013, at 1:21 AM, johnnygalt2000 wrote:

    Comparing apples to oranges - or apples to androids in this case - makes for confusing headlines and stories because there is no company called "Android" making and selling tablets. "Android" shipped zero tablets during the period when Apple shipped 14.6 million, which was almost twice as many as the next largest actual maker and seller of tablets, Samsung.

    This has become a common error: comparing a hardware/software company to an operating system that generate very little revenue for its creators and very little if any profit for many of the tablet and phone makers who use it in their products.

    I liken it to saying that Toyota sold 20 million cars, but other brands of cars using Goodyear tires sold 40 million, so Toyota is facing a big threat from Goodyear.

    Market share for a free OS is one of those metrics that, at the end of the day, tells us nothing and provides no real reference point.

  • Report this Comment On July 31, 2013, at 1:52 AM, mjs1138 wrote:

    This article's content is particularly inaccurate, vile and filthy. The truth is there is no platform war. App development is different the desktop application development, so you can't compare today's mobile app ecosystems with the boxed desktop bloatware of yesterdecade. Guess what, first class development of apps goes to iOS because: a) people actually pay for apps on iOS and, b) Apple actually has development standards and vets the apps that go up (that's called premium branding and that silly green robot just doesn't have any). Android doesn't compete with iOS any more than Kia competes with Mercedes. Just like Kia and Mercedes, all iOS and Android devices use the same document standards: SMS, 4G, HTML, DOCX, XLSX, voicemail, email, JPG. They are interoperable by definition and therefore THERE IS NO WAR any more than Kia fights Mercedes for road space. We all know why people buy Android tabs: because they're cheap. And you get what you pay for. Apple's not in the commodity business, and they never have been. The idea that Mercedes will go out of business because Kia sells more cheap cars is insane. They are completely different market segments, and you obviously an Apple hater, and not a very smart one. Chris, you're publishing peddling fallacy under your name. You should think twice before posting such nonsense.

  • Report this Comment On July 31, 2013, at 2:12 AM, FilmDude wrote:

    No matter what way you cut it, Apple sold less tablets than it did in the second quarter of last year. Apple's marketshare is declining as Samsung, Asus, and other Android vendors increase their marketshare. That's not good for Apple investors long term as Apple risks being reduced to a niche player once again. People made all kinds of excuses for Apple in the smartphone market, until Samsung surpassed them in both revenue and profits (while Apple's market share continues to erode). The same will happen with tablets.

  • Report this Comment On July 31, 2013, at 3:10 AM, applefan1 wrote:

    Apple is at the end of a product lifecycle and Samsung is at the beginning of a product lifecycle. Apple isn't going after the same Markets that Samsung's going after. Samsung is going after the low end, no profit market which Apple is not going after. Apple hasn't gone after the large screen smartphone market, yet. Apple also hasn't signed on several of the largest cellular carriers, so once they get them on line, then we'll see Apple market share increase. Apple is also going after the markets of people that spend money as well as the large enterprise customer market, which is going to give stable long term repeat business.

    Asus hasn't made hardly any money. Oh, NEC Electronics is another casualty in the smartphone market as they are closing that product line. I'm sure we'll see more fall out. I read that HTC is not going to go after the high end market, but they are going to go after the lower end market.

    No matter how good some of these products are, a lot of the Android products simply don't sell well. Samsung is the only real Android player since they make the majority of the components themselves, so they just save money in OS development. Plus they don't always update the OS on every model phone they make, which saves them money.

    I still can't believe why people are dumb enough to buy a product that doesn't even have the latest OS on it. If Samsung and other canceled outdated products, there would only be a small handful of Android products to choose from.

  • Report this Comment On July 31, 2013, at 8:12 AM, vernr75 wrote:

    Who would have thought that the iPad could drop all the way back down to under 15 million devices per quarter AFTER the release of the iPad mini?

    This is all happening as Android tablets reach a milestone that Apple has not achieved...and probably never will. They've managed to move over 30 million tablets in a single quarter and all indications are that they will keep doing so and more in the future. Apple has only managed to hit the 20 million mark one time and that was because of the novelty surrounding the introduction of the iPad mini combined the boost in sales provided by the Christmas season. The big question I have is this - how much worse would iPad sales have been without the mini and without iPad use by US enterprise? The iPad sales figure could have definitely been well under 10 million devices - yikes!

    So why is Android beating iOS in the tablet market? The answer is simple. Like it or not, tablets are non-essential devices to most people. Most folks will never pay Apple's premium price for a tablet, not even for the mini...and that goes double for anyone who already has a smartphone. Android is beginning to dominate tablet sales across the planet because it's the only platform that has the tablet priced appropriately - as a non-essential impulse purchase. Few people are going to want to splurge on a premium priced non-essential device while they are simultaneously paying high monthly fees for their current 'essential' smartphone. And when it comes to a decision between upgrading the smartphone and buying or replacing a tablet, the smartphone will win every time unless the tablet is inexpensive. And on top of that, there's that thing we call the "phablet" phenomenon where some folks are perceiving the larger smartphone screen as being good enough to neglect the tablet idea completely. I'm willing to bet that will be the reason why Apple will not be increasing its iPhone screen size any time soon.

    So, is there anything that Apple can do about this? If gaining market share is even remotely important to them, they'll absolutely need to drop prices. Otherwise, the iPad becomes "that niche device with the high price tag that most people don't buy", just like its cousin the mac. iOS7 will have no implact on sales of new iPads because current iPad users be able to upgrade. A retina mini is Apple's worst cannibalization nightmare...as if the mini hasn't decimated its profit margins enough already. Android tablets regardless of size have always competed with the full sized iPad. Therefore, Apple cannot dare attempt to compete with Android 7 inch devices on hardware features without allowing the mini to also compete with its own 10 inch tablet. Apple's potential user base is so much smaller than Android's that any move it makes to compete with Android on hardware can result in product cannibalization.

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