Who Will Take a Bath With Mr. Tablet Bubble?
Other tablet vendors may want reconsider their build plans for 2011, given the iPad 2’s opening weekend stock-outs. Because the disparity between market adoption rates for the iPad and its rivals suggests the tablet bubble could burst before the end of the year. And if it does, tablet market hopefuls could find themselves with an ugly oversupply.
To wit, J.P. Morgan expects some 81 million tablets to be manufactured in 2011, with just under 48 million being shipped to retailers. That’s a massive discrepancy. Lop 20 percent off that manufacturing projection and you still get a surplus of 17.2 million units.
That’s nearly 36 percent oversupply. And it’s J.P. Morgan’s base-case scenario. The firm’s best-case scenario is a surplus of 7.6 million units and 13.2 percent oversupply. Worst-case scenario: A 51 percent oversupply of 21.9 million units.
In all three versions, the tablet bubble pops and more than a few manufacturers new to the market take a financial bath, leaving Apple’s massive lead relatively unshaken this year.
“The iPad 2’s early success is a warning sign of a global tablet bubble,” J.P. Morgan analyst Mark Moskowitz said. “There are many competitive tablet entrants expected, but so far, we think that both Samsung and Motorola have experienced disappointing adoption curves. We expect more of the same from other entrants. Meanwhile, Apple’s iPad 2 technical and form factor improvements, coupled with opening weekend stock-outs, point to a widening gap in market share ownership potential. We expect Apple to own at least 61 percent of units in 2011, but there is likely upside to this estimate given the early-stage momentum of iPad 2.”
Attrition in the tablet market was inevitable, particularly given the sheer number of devices announced earlier this year. But if Moskowitz is right, this is shaping up to be a real bloodbath.
[Image Credit: Audiophile & Synergy Industries]