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Apple's share of the tablet market is contracting as tablets made by Samsung, running Google's Android, grow in popularity.
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Apple's (AAPL +0.00%) share of the tablet market continued to fall in the third quarter, according to IDC, dropping below 30%. Tablets powered by Google's (GOOG +0.00%) Android, particularly those made by Samsung (NASDAQOTH: SSNLF), are growing ever more popular.
Apple's eroding market share is altogether not surprising. In the coming years, Apple's tablet market share should fall further still, eventually dropping into the single digits.
Apple maintains its premium pricing
Apple's share of the traditional PC market has long remained below 10% -- Apple's iPad business seems destined to follow. This is largely due to Apple's premium pricing, wherein most buyers simply cannot afford Apple's devices, even if the devices the company offers are superior.
The average PC sells for around $500-700, while the cheapest PC Apple offers starts at $999. A similar phenomenon will likely take hold in the tablet market, as cheap, capable tablets appear to drive down the cost. IDC estimated that the average selling price of a tablet would fall to $381 this year.
Google and Samsung are turning their attention toward tablets
But $381 will look expensive in the years ahead. Companies are introducing cheaper tablets than ever before, and some of them are quite capable. Most of them run Google's mobile operating system.
Google's own Nexus 7 is a little bit slower and a little bit smaller than Apple's iPad Mini with retina display, but at just $229, it's $170 less than Apple's competing tablet. Samsung's Galaxy Tab 3 10.1-inch is slower and a bit heavier than Apple's iPad Air, but it's also $140 cheaper.
As with its phones, Samsung offers a wide variety of different tablets. Its Galaxy Note 10.1 is actually $50 more expensive than Apple's iPad Air, but comes with more features, including Samsung's S-Pen, its smart stylus, and ability to interface with Samsung's Galaxy Gear smartwatch.
Samsung has been pushing developers to design their apps around its hardware. Twitter's Android tablet app, for example, remains a Samsung exclusive for the time being, and includes unique, S-Pen-dependent functionality. For these efforts, Samsung has seen its share of the tablet market soar, up 123% from the prior year.
Google itself is working to make Android tablets more attractive, redesigning its app store to better showcase apps optimized for Android tablets. The problem with Android tablets is that most apps are blown-up versions of their handset counterparts; emphasizing tablet apps could bring more money to developers, and thereby increase the chance they design tablet-optimized apps.
Is Apple doomed?
Although I think it's only a matter of time until Apple's share of the tablet market falls into the single digits, the King of Cupertino is far from doomed. Tablets running Google's Android (many of which will be made by Samsung) will continue to gain share at Apple's expense, but Apple can continue to survive and thrive in the tablet market.
Even though the Mac's market share has stayed in the single digits, Apple's Mac has been more profitable than its Windows PC competitors; indeed, analyst Horace Dediu estimates that Apple now makes more from its Mac than the top five Windows PC vendors combined. The same will likely be true for tablets.
Investors just shouldn't expect the iPad to take over the world.