Tablets: Apple iPad To Dominate, Little PC Canibalization

Sanford Bernstein chip analyst Stacy Rasgon this morning offers up a 49-page white paper summarizing observations on the tablet computer marketstemming from recent conversation with fellow Bernstein analysts Toni Sacconaghi, who covers Apple (AAPL), Pierre Ferragu, who covers Nokia(NOK), and Alberto Moel, who follows telecom stocks.

The conclusions: Tablets are going to grow like wildfire, with perhaps 215 million units being sold in 2015, for a compounded annual growth rate of 66%. Consumer interest is “staggering,” the authors write, with 20% of individuals surveyed by the firm saying they’ll by a tablet in the next 12 months. “We have never seen such a high purchasing intent for a new category in the past.”

Apple will dominate tablets “for the foreseeable future,” they write, with the iPad having sold 19.5 million units in year one, triple the comparable metric for the iPhone, and double what Netbooks did, despite a higher price for the iPad.

“Apple has created a company the size of EMC (EMC) in one year” if iPad were its own company, they write.

There will be only “modest” cannibalization of PCs, however, as people will own multiple “Internet access devices.” Dell (DELL) and Hewlett-Packard (HPQ) have the most credibility among consumers to sell a tablet, versus HTC (2498.TW) and other smartphone makers.

But to compete with the iPad, costs have to come down. Rasgon and company don’t see costs coming down quickly, as panel prices are about as low as they can go at the moment, but a sub-$200 tablet is possible by 2015.

As for the chips, Rasgon thinks Texas Instruments (TXN) is well-positioned with chips based on ARM Holdings (ARMH) designs. However, “Intel (INTC) is likely to miss the boat, as its processors have relatively high power consumption and its ultra-mobile chips are not expected until 2013 at the earliest.
Rasgon notes that of the tablets released so far, Nvidia (NVDA) has the dominant share, with 27% of non-Apple tablet application processors. That may not remain the case, he thinks, as other vendors may have a crack at the next version ofGoogle’s (GOOG) Android operating system, “Ice Cream Sandwich.”
I’d note that UBS analysts speculated a week ago that TI may become the reference platform for Ice Cream Sandwich.

Sanford Bernstein chip analyst Stacy Rasgon this morning offers up a 49-page white paper summarizing observations on the tablet computer market stemming from recent conversation with fellow Bernstein analysts Toni Sacconaghi, who covers Apple (AAPL), Pierre Ferragu, who covers Nokia (NOK), and Alberto Moel, who follows telecom stocks.

The conclusions: Tablets are going to grow like wildfire, with perhaps 215 million units being sold in 2015, for a compounded annual growth rate of 66%. Consumer interest is “staggering,” the authors write, with 20% of individuals surveyed by the firm saying they’ll by a tablet in the next 12 months. “We have never seen such a high purchasing intent for a new category in the past.”

Apple will dominate tablets “for the foreseeable future,” they write, with the iPad having sold 19.5 million units in year one, triple the comparable metric for the iPhone, and double what Netbooks did, despite a higher price for the iPad.

“Apple has created a company the size of EMC (EMC) in one year” if iPad were its own company, they write.

There will be only “modest” cannibalization of PCs, however, as people will own multiple “Internet access devices.” Dell (DELL) and Hewlett-Packard (HPQ) have the most credibility among consumers to sell a tablet, versus HTC (2498.TW) and other smartphone makers.

But to compete with the iPad, costs have to come down. Rasgon and company don’t see costs coming down quickly, as panel prices are about as low as they can go at the moment, but a sub-$200 tablet is possible by 2015.

As for the chips, Rasgon thinks Texas Instruments (TXN) is well-positioned with chips based on ARM Holdings (ARMH) designs. However, “Intel (INTC) is likely to miss the boat, as its processors have relatively high power consumption and its ultra-mobile chips are not expected until 2013 at the earliest.

Rasgon notes that of the tablets released so far, Nvidia (NVDA) has the dominant share, with 27% of non-Apple tablet application processors. That may not remain the case, he thinks, as other vendors may have a crack at the next version of Google’s (GOOG) Android operating system, “Ice Cream Sandwich.”

I’d note that UBS analysts speculated a week ago that TI may become the reference platform for Ice Cream Sandwich.

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