Ronnie05's Blog

Amazon Kindle Tablet firing up Tablet growth numbers

Posted in Industry updates, Mobile Computing by Manas Ganguly on December 2, 2011

Nearly two years after Apple Inc. rolled out the iPad, a competitor has finally developed an alternative which looks like it might have enough of Apple’s secret sauce to succeed

Just two weeks after its introduction, Amazon’s Kindle Fire already is shaking up the market, with the device expected to surpass all other iPad rivals to take second place in the global media tablet business in the fourth quarter.Coming up from zero in the third quarter, Amazon will ship 3.9 million Kindle Fire tablets during the last three months of 2011, according to a preliminary projection from the IHS iSuppli Display Materials & Systems Service from information and analysis provider IHS (NYSE: IHS). This will give the company a 13.8 percent share of global media tablet shipments in the fourth quarter, exceeding the 4.8 percent held by No. 3 Samsung, and second only to Apple’s commanding 65.6 percent portion of the market, as presented in the table below.

The Kindle Fire’s rapid ascent will help fuel the expansion of the entire market, with the additional shipments contributing to a 7.7 percent increase in the IHS forecast of total media tablet shipments in 2011.

Amazon, with the Kindle Fire, has found the right combination of savvy pricing, astute marketing, accessible content and an appropriate business model, positioning the Kindle Fire to appeal to a brand-new set of media tablet buyers. Imagine a Walmart Hyperstore with individual 24*7 supply pipeline to the homes of each of its consumers. Amazon is dong just that with the Kindle in the Digital Space.

IHS now predicts global media tablet market shipments will amount to 64.7 million units in 2011, compared to the previous forecast issued in August of 60 million. The total shipment level represents 273 percent growth from 17.4 million units in 2010.The forecast for the following years also has been increased, with shipments expected to rise to 287.2 million in 2015, up from the previous forecast of 275.3 million. Sales of the Kindle Fire alone will account for much of the growth in sales. Dramatically reduced pricing in general in the non-Apple portion of the media tablet market also will play a role in expanding sales.

A departure from the earlier business and profit models

Most other Android tablet makers must earn a profit based on hardware sales alone. In contrast, Amazon plans to use the Kindle Fire to drive sales of physical goods that comprise the majority of the company’s business. As long as this strategy is successful, the company can afford to take a loss on the hardware—while its Android competitors cannot.

While Apple remains dominant in the media tablet market, speculation is rife that the company will respond to the Kindle Fire’s aggressive pricing with a lower-cost version of the iPad.

And Apple is expected to reply back…

A far more likely scenario is that Apple also may reduce the pricing on the iPad 2 when the company introduces the iPad 3. This will provide a value alternative for entry-level users in the same way that the company continued to offer the iPhone 3 when it rolled out the iPhone 4. This approach would allow Apple to maintain its target profit margins on both the iPad 3 and the iPad 2, while offering end-users an ever-expanding family of products.

All numbers are according to IHS iSuppli december 2011 estimates

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