Why Tablet Sales Will Outstrip PCs by 2015

The PC's dominant days might be over, but tablets could have a relatively short run as their replacement.

Jul 9, 2014 at 8:08AM

The dominant days of the desktop and laptop are coming to a close. PC sales have fallen in recent years as alternate devices such as Apple's (NASDAQ:AAPL) iPad and tablets running Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) operating system have become more popular.

Since the release of the iPad in April 2010, PCs have been steadily declining while tablets have gained. The PC will have one last hurrah -- albeit a muted one -- in 2014 before falling behind tablets in sales.

Let's take a look at the estimated worldwide device shipments by segment (figures are in thousands of units):

Device Type

2013

2014

2015

Traditional PCs (desk-based and notebook)

296,131

276,221

261,657

Ultramobiles, premium

21,517

32,251

55,032

PC Market Total

317,648

308,472

316,689

Tablets

206,807

256,308

320,964

Mobile phones

1,806,964

1,862,766

1,946,456

Other ultra mobiles (hybrid and clamshell)

2,981

5,381

7,645

Total

2,334,400

2,432,927

2,591,753

Source: Gartner (June 2014)

Ranjit Atwal, research director at Gartner, said that 2014 will be "marked by a relative revival of the global PC market." After declining 9.5% in 2013, the global PC market is on pace to contract only 2.9% in 2014. 

That will allow for one last year on top, but it seems unlikely that the public will ever return to a heavy reliance on desktops and laptops. Considering the growing field of tablet hybrids that offer keyboards and other accessories once only found on a PC, the pool of people needing full-size computers will continue to shrink.

Why will it take another year?
The corporate world has been the slowest to break its PC habit. There has also been a spike in PC sales in 2014 due to businesses upgrading from Windows XP. That, combined with expected replacements of old corporate machines, should make for 60 million professional PC replacements in mature markets, said Atwal.

The XP bump was a one-time thing as Microsoft (NASDAQ:MSFT) stopped supporting the OS with new safety updates in April. Some individuals chose to take their chances and keep using the now-vulnerable-to-viruses OS. Businesses for the most part did not do that and upgraded either before or by the date support was dropped.

This won't happen again. The traditional PC market -- desktop and notebook -- will follow a downward trend that's likely to accelerate in coming years.

Tablet sales are beginning to level off, but are still climbing.

Tablet sales are slowing too
Tablets have moved from a phenomenon to a common device. Prices have fallen dramatically, and it's now possible to buy an Android tablet for under $100. Higher-end devices like Amazon's (NASDAQ:AMZN) Kindle tablets come in under $200. Even iPad prices have become more reasonable, dropping from the initial $499 entry point to $299 for the entry-level Mini.

Falling prices, increasing acceptance, and the creation of apps that make it possible to do most things that once required a PC have pushed many to buy tablets. For some, the devices replaced a second machine or a travel laptop. Others have switched over to using a tablet as their primary device.

Because so many tablets have already sold, the market segment won't continue the tremendous growth it has experienced in recent years. While some will upgrade, the biggest opportunities for growth will be in markets where tablets give people who otherwise couldn't afford a computer the chance to own a device.

Gartner estimates that sales of tablets will see a relative slowdown in 2014 to reach 256 million units, an increase of 23.9% from 2013.

Don't forget smartphones
The growth of tablets will also be checked by the explosion of smartphone availability in the developing world.

Sales of mobile phones are expected to reach 1.9 billion units in 2014, a 3.1% increase from 2013. Sales of smartphones, which exceeded those of the rest of the market in 2013, will continue to do well, and Gartner estimates that smartphone sales will represent 88% of global mobile phone sales by 2018 -- up from 66% in 2014.

Ultimately, smartphones could become entry-level devices that lead to people wanting more. Many of the new smartphones being sold are lower-end Android devices that ultimately could lead users to want Android tablets. It's also possible that having something less than a top-of-the-line phone will make higher-end phones aspirational devices.

Americans have certainly shown a willingness to buy two or even three devices in an OS family. Whether the developing world follows is likely a function of both economic development and a company's ability to convey the value of adding a tablet to one's smartphone.

One thing seems certain: In the parts of the world where the biggest growth is likely to occur, most people won't be buying PCs.

It may not matter soon
Gartner's forecast assumes that by 2015, PCs and tablets will still be distinct categories. That seems less likely, as hybrid devices are becoming more popular. Microsoft markets its latest Surface machine as a tablet that can replace a laptop. In reality, it's a tablet that's also a laptop -- or a laptop that's also a tablet.

By 2015, it seems likely that the lines will blur even further. Hybrids based on docking phones with monitors and keyboards have failed so far. But as phones become more powerful, that form factor could see a reversal of fortune.

PCs had their day and tablets are having their time, but that time may be relatively short. Though 2015 should be the year tablets overtake PCs, it seems likely that smartphones, which are already the sales leader, will eventually become portable computers that users plug into monitors and keyboards -- or even virtual peripherals.

It seems inevitable that devices that do more will replace dedicated machines that handle only specific activities.

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Daniel Kline is long Apple and Microsoft. He owns various tablets but prefers a laptop. The Motley Fool recommends Amazon.com, Apple, and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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