The iPad, once a foundational and impressive chunk of Apple’s overall revenue, has been stuck in a rut for over three years. Sales have slumped for 13 straight quarters, despite Apple’s various attempts to breathe new life into the tablet market by releasing products like the iPad Air 2 and the iPad Pro. The company is finally reporting a significant surge in sales, courtesy of the new iPad variant released this year. Its secret? A $ 329 price tag.
The latest iPad (sometimes referred to as the iPad 2017) isn’t a huge speed jump over the iPad Air 2, and it’s a bit thicker and heavier as well. It’s also taken some criticism for its display choices; the panel lacks an anti-reflectivity coating or fully laminated display (whether these criteria are critical is, of course, a personal opinion). But the buying public, evidently, has been more swayed by a cheaper iPad, even if that iPad isn’t necessarily on the cutting edge of technology — and Apple is taking a significant hit to its profit margins to move this hardware.
SixColors.com has put together an excellent visual map of Apple’s overall earnings and product sales (hat tip to Daring Fireball for cluing us into the link). You can hit SixColors for the full report; two iPad-related slides are shown below:
iPad sales growth was 15 percent in Q3 2017 of Apple’s fiscal year (Apple’s fiscal year is offset from the calendar year), but its revenue was only up 2 percent. That likely explains the decision not to laminate the display or include an anti-reflective coating — Apple isn’t making very much money off these tablets, and you can see that reflected in its tiny revenue gain even though sales shot up dramatically.
Have Tablets Fallen Into the PC Trap?
When tablets first hit the market, it seemed as if Apple had tapped into an inexhaustible gold mine. The popularity of tablets is directly tied to the sharp decline of PC sales — back in 2010, when phones were less capable than they are now, they weren’t seen as undermining the PC market in the same fashion. Even today, there are considerable differences between running iOS or Android versus the multi-tasking capability of a Windows system.
Phones have become ubiquitous, but people still tend to replace them every two years. Tablets, on the other hand, have been a near-graveyard on the Android side of things, and a steadily declining market for Apple. We suspect the decline is largely due to the same factors that have impacted the PC market. Modern tablets haven’t advanced that much compared with previous models, and users are replacing them over longer periods of time.
It’s not hard to see an argument for the above. If you bought a tablet because it was larger, so you could watch movies or do some relaxed web surfing, chances are that tablet still doing those tasks just fine three years later. The iPad Air 2 had some specs this newer iPad still doesn’t match: 2GB of RAM, a tri-core CPU clocked at 1.5GHz, and up to 128GB of storage. If you bought into the iPad ecosystem in 2014, chances are you aren’t feeling the need to upgrade yet. Meanwhile, phone screens have gotten large enough that multiple models could be plausibly classified as small tablets as opposed to large cell phones.
It’ll be interesting to see if this trend continues and how Apple handles it in the future. Launching a $ 329 tablet positions the company to fend off some Chromebook competition (though not all of it, since Chromebooks sell for under $ 200), but it also means Apple is taking a margin hit, something the company has generally refused to do in the name of gaining market share.