air

Tim Cook may well be right that iPad sales didn’t really fall 16 percent year-on-year, and that the number was artificially deflated by reduced retail inventories. It’s also true that it’s been the fastest-growing product line in Apple’s history, and his argument that its success in education will drive future demand also has merit.

But this chart from Business Insider tells a story that can’t be denied: the overall trend is for flat iPad sales.

ipad

Contrast with the graphs below: iPhone growing, Mac flat.

phone-mac

What this suggests is that consumers are treating the iPad much more like a PC than a phone.

Consumers pretty consistently upgrade their handsets every 1-2 years. It’s been suggested that this may change as carriers move away from so-called subsidized contracts, but for the majority the upgrade habit is ingrained – and most alternative contracts are still geared to encouraging that annual or biennial upgrade.

Adding to sales generated by that regular upgrade habit is the demand for replacement devices. iPhones are handled multiple times a day, much of it while out and about. As a result, they are frequently damaged, lost and stolen. What is a misfortune for the owner – or their insurance company – is an additional sale for Apple.

old

PCs, in contrast, have a far less predictable upgrade cycle. It’s commonplace for people to use Macs that are five or more years old – and some keep them much longer than that. I frequently see pre-unibody MacBook Pros in coffee shops, and even white MacBooks are not an unusual sight.

But Apple pitched the iPad to investors as a growth market, like the iPhone. Not a flat or declining market, like laptops.

In the early years of the iPad, Apple had no problem delivering on that promise. As more and more people saw the appeal of the device, sales rocketed. Many of those buyers were, of course, buying the iPad as a replacement for an elderly Windows laptop. Easy to handle, easy to use, instant on/off, no worries about viruses – it was the perfect replacement.

iPad2

But while initial take-up was strong, the upgrade cycle appears to be significantly longer than for the iPhone. There are plenty of people out there still happily using the original iPad, purchased back in 2010, and the iPad 2 remained so popular that Apple kept it on sale until earlier this year.

Apple also sees less demand from distress replacement purchases. Unlike phones, many iPads are used primarily or exclusively at home. Those that are taken out of the home are used fewer times a day, all of which means they are far less likely to be lost, stolen or dropped.

fashion

Let’s be honest here: for many iPhone owners, it’s part useful device and part fashion accessory. While 9to5Mac readers may upgrade for the tech, a significant factor for more mainstream consumers is wanting to be seen using the latest shiny new toy.

Laptops, in contrast, are seen more as utility items. They tend to continue to be used until they stop working well. Fewer people upgrade to be seen using the latest, and even if they wanted to, few non-techies could identify the year of a MacBook Air at a glance.

Apple’s problem with the iPad may be that consumers look at them as mini laptops, not as phones. If so, upgrades every 3-5 years, rather than every 1-2, may be here to stay. And the pressure on Apple will be not just to create new product categories, but new categories with sustained potential for growth – because the iPad no longer seems to fill that slot.

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63 Responses to “Opinion: Will PC-like upgrade cycles keep iPad sales flat?”

  1. I have a gripe about their ipad strategy, which may be relevant and may be nothing. Apple sort of treats the iPad like a second class product behind iPhone. Siri, Touch ID, both were withheld from the iPad.

    • Stetson says:

      Part of that is because iPhones start at $650+ without a subsidy. iPads start at lower prices despite having more expensive bodies, screens, and batteries.

    • PMZanetti says:

      iPhone makes way more money, and thus deserving of temporary exclusive new features to further drive sales.

      Furthermore, both of those features make a lot more sense on iPhone than on iPad. That doesn’t mean they DON’T make sense on iPad, just that they make MORE sense on iPhone.

      My Siri usage is still 95% iPhone despite having it on both devices.

      And TouchID? I pick up my phone with one hand, rest my thumb on the button, and I’m in….my iPad gets picked up with two hands, I open the SmartCover, and then I’m in. Sure, if people use pass codes on their iPads (which they should even though I usually don’t)…then yeah TouchID would be a welcome alternative….

      But I think you’ll find pass codes far more common on iPhone than iPad, and thus why TouchID makes more sense there. But don’t worry, it will undoubtedly make its way to iPad.

    • Quite a few reports hinted that the iPhone 5s production was limited in the first few months due to Touch ID availability which apparently had to do with low yields. Given that they could not increase production rapidly for the iPhone 5s i am fairly certain that there was no way apple could have managed to somehow ship 20 odd million more Touch ID hardware units in time for the iPad air launch. Given the huge advantage for the iPhone in terms of units sold and the fact that the iPhone makes over 50% revenue for apple, its quite understandable that it gets the touch ID feature ahead of the iPad. The iPad also is (and was even prior to the air) in a much better position vis-a-vis the competition whereas the smartphone market and ecosystem are considerably more competitive.

      I still see plenty of “revenue-addition” happening through the tablet business for apple. It may not all be through hardware, but I see a lot of it come through IOS and newer apps in the ecosystem. There is really not much apple can do to have people replace their iPads faster other than invest a lot in R&D to make better products every year. If they do get into payments in a big way, and if the Touch ID is an option in the Ipad AIR 2.0 (which is pretty much a certainty) then that would be one big reason for folks to replace their 1 to 2 year Ipads..

      • PMZanetti says:

        There is no shortage of “Reports” that claim Apple is on low supply of everything known to man.

        Apple does not let such trivial things dictate their product strategy. If they wanted 10 million of them, they would have made 10 million.

  2. Brian Victor says:

    Your spellchecker missed “marked” in this sentence. I think you meant “market”. Feel free to delete my comment.

    “But Apple pitched the iPad to investors as a growth marked, like the iPhone. Not a flat or declining market, like laptops.”

  3. first gen iPad is still kicking. It probably ran better than devices running 7.0 when it came out haha

  4. Brian Victor says:

    A lot of the lifecycle observations in this article are corroborated by my own experience. My aging Late 2009 iMac just received almost $400 in repairs to keep it viable for what I hope will be another 3-4 years. I’ll use it until it breaks. Likewise, I plan to use my new Macbook Pro Retina as a portable device until the battery is non-rechargeable, then use it as a very flat Mac Mini until it simply won’t work any more. I currently replace my iPhone every 2 years, but only because the $300 up-front fee is far less than say $700 for a similarly spec’d iPad. And by the way I don’t even own an iPad yet. For now, my needs are met by my current devices. I would love to have one, of course, but my budget has to give way to higher-utiltiy devices like my iMac and Macbook. In my view, the iPad is a “nice to have”, highly portable device that I demonstrably can live with out.

    Not that I want to live without it :)

    • Same thing here. My HD suddenly departed to a better place in December 2013, after 4 years of light duty, so i took the opportunity to refresh the whole beast by doubling the Ram to 8 MB, replaced the HD by a 256 SSD with the system and applications, took off the DVD and placed a 1TB HD instead, while the DVD is now housed in a new external enclosure that sits by the iMac’s foot. Also hope nothing more will break for the next 3/4 years…but it really feels like it’s a brand new machine

  5. This article shows a fundamental lack of understanding of math. Whether the replacement rate is 1 year or 5 makes no difference, in the long run, to whether sales grow or decline. It only affects the overall level. The only way to get consistent growth is for more people to be owners of the class of device or for those people to increase the numbers they own.

    Current sales are an interplay between new users and replacement users.

    PCs are stable because everyone who wants a PC owns a PC and they replace them at some average rate. They are actually declining, probably because people are continually lengthening the replacement cycle or swapping multiple PCs in a household for less PCs and more tablets.

    So unless tablets have nearly reached saturation, it’s pretty surprising that sales are falling off.

    • Ben Lovejoy says:

      It makes a huge difference: if 10 people buy a widget and then replace it every year, that’s flat sales right there. It only takes one extra person to buy one to boost sales by 10%.

    • Brian Victor says:

      I could be wrong, but I believe a fair number of people are saying that the tablet market is, in fact, reaching saturation.

      • Apple clearly does not believe this is true. ~200 million tablets were shipped in 2013, a huge majority not even close to the iPad in functionality. Cook said they believe the tablet market will grow to become larger than the ~400 million/year PC market. Touchscreen tablets (iPad is 4 yrs. old) are no where near saturation.

    • degraevesofie says:

      This article shows a fundamental lack of understanding of math. Whether the replacement rate is 1 year or 5 makes no difference, in the long run, to whether sales grow or decline.

      “In the long run”, is an important qualifier though: I.e., your statement is only true in some kind of steady-state model.

      That said, I’m highly skeptical of the analysis in this article; i.e, I don’t think the longer upgrade cycle plays *that* much of a role into the current flattening of the iPad sales curves.

    • rahhbriley says:

      I agree with Eric. This is more a tale of saturation than upgrade cycles. Upgrade cycles wouldn’t be affecting growth, unless Ben is suggesting that many early iPad owners were quick to upgrade to iPad 2 or iPad with Retina, but not then again to the latest/greatest. Which I think more than anything would be a reflection of a few short coming of the original iPad (I say that lightly and am referencing weight, thickness, camera, and speed).

      @Ben Lovejoy your argument would have to be that upgrade cycles have slowed down. You seem to indicate those that this slower upgrade cycle has been constant (Maybe I’m inferring too much)? Meaning that the growth is do to penetrating the market, not a change in upgrade cycle. Ya dig??

  6. fredhstein says:

    Great to see the charts, especially the first. It explains two important phenomena that have confused investors.
    1) In FY ’13, Apple’s huge success with the iPad mini hurt margins which increased investor panic about declining margins. And especially compare to FY ’12′s margins, which were a fluke.
    2) Now in FY ’14 people should not be alarmed by comparisons to FY ’13 iPad sales which benefited from the same iPad mini boom.

    For some guesswork.. I suspect that phablets cut some of the iPad mini business. If (when) Apple enters the Phablet format, it will further cannibalize the mini.. which is OK.

  7. An easy solution for Apple here would be to release an iPad every other year. Would keep design costs down and would make a new iPad that much more attractive – at the cost of falling behind the competition on the off years

  8. chrisl84 says:

    The iPhone is someones lifeline in immediate emergency situations. That is a product that must be upgraded when it begins to get sluggish or the battery does not hold up as well as it did when it was brand new. The iPad is not used as a lifeline, as long as it works pretty well the average consumer will be content with what they have.

  9. ifunography says:

    I’d definitely agree. I only replaced my original iPad (which I pre-ordered and received on release day) last month, and my main reason for the upgrade was so I could use it for development of iOS 7 apps but otherwise it mostly fulfilled my needs and still operated beautifully. I now have the iPad mini w/ Retina Display and I intend yo hold onto it for as long as possible before my next upgrade.

    Contrast that with iPhone, I had the iPhone 4S for 2 years, upgraded to the 5S and I’ll likely get the iPhone 6.

    Also, I think you missed “be” in the first sentence of the second paragraph.

    “But this chart from Business Insider tells a story that can’t denied: the overall trend is for flat iPad sales.”

    • Ben Lovejoy says:

      For me these days, it needs a standout feature of some kind. The amazing battery-life of Haswell processors did it for the MacBook Air, and the greatly-slimmed form factor for the iPad Air. Still happy with my iPhone 4S, but am sure I’ll get an iPhone 6 if for no other reason than I expect Touch ID payment to be up-and-running by then. (Thanks for the typo – corrected.)

      • airmanchairman says:

        I agree. The failrly-knowledgeable-geek factor may be at work here, surprisingly.
        I held back on the iPad until its Retina display model (iPad 3) was released.

        Upgrading to the Air was a powerful temptation, but its name, the new 64-bit chip technology plus its lack of Touch ID and true workhorse productivity all strongly suggest the imminent arrival of the iPad Pro in the near future.

        The consumer market is not as daft or impulsive as Apple or the analysts figure and this factor should not be underestimated in future product iterations.

  10. icrew says:

    FWIW, I’ve got an iPad 3, ordered the week it was released, and I’ve got no intention of upgrading it anytime soon. I probably won’t upgrade as long as I can run the current version of iOS on it. I do use it regularly, but much less than my iPhone or MacBook Pro, so if it dies or misbehaves or is a touch slow, it’s at most a minor inconvenience. That’s not at all true for the other two. For folks like me that have all 3 devices, I’d guess that a lot of them feel the same way about their iPads. For folks like my uncle, who has an iPad, but not a computer or smartphone, I’d imagine they might upgrade a bit sooner. (Then again, maybe not: folks like that are probably a good bit less tech-obsessed….)

    The above is really just a whole bunch of early morning rambling with very little point to it, I guess…..

    • airmanchairman says:

      Rambling sentiment that may well be shared by tens of millions of tablet owners who also own smartphones and laptops and use all 3 regularly.

      I think the flattening sales suggest that you are likely on to something real in terms of a trend as far as tablets go.

  11. I don’t see any reason to upgrade from my IPad 2 that works perfectly fine. My question would be why haven’t Apple utilized that 64 bit processor to make it worth the upgrade? They were way a head of everyone else with 64 bit and they have not took advantage of it.

  12. I believe the point here is that Apple doesn’t know what to do with the iPad, sure, they put a new processor in it every year, and maybe upgrade the display… But there were only 3 real upgrades(recognizable for the average consumer):
    iPad 1 -> Initial Release
    iPad 2 -> Smartcover, design, slimmer, whatsoever
    iPad Air -> Remove Side bezels

    The iPad 3.Gen(besides it’s retina display) didn’t have really new technology, same with the 4th.

    • icrew says:

      I agree with your premise, but I’d actually argue that it’s the iPad 1 (initial release), iPad 3 (retina display–really gorgeous, really noticeable), and maybe the iPad Air (a little smaller and lighter) that were the most dramatic changes to the line…

    • kpom1 says:

      For the most part, that’s what everyone else is doing, too. Samsung has done what it always does (release a bigger version, throw a bunch of software features on there to see how well they work or don’t work). The entire tablet market seems to have reached a saturation point quicker than anyone expected.

  13. It’s true. iPads are more like Macs than iPhones. If you already have an iPad, the only reason to buy the new model every year is because you want it, not because you need it. You can get years out of an iPad. My wife uses an iPad 2. I use an iPad 3. I purchased both models on release day. Even though they are several years old, I see no compelling reason to drop another $500 on a newer model. (Other than just wanting an Air because they look amazing.) They are both still very capable and do exactly what I need them to do. Once “everyone” has an iPad, and the market is somewhat saturated, I expect that you’ll only see little bumps every 3 years as old users upgrade to newer models.

  14. I was once obsessed with consistently upgrading my iPads. I had a 2,3, and now an Air. But that time between the 3 and Air plus my time since owning an Air has really shown me once I have an iPad, i have an iPad. As long as the os is not sluggish the performance does not really matter.

    Let’s face it, just like PCs, the majority of the people using a tablet are not playing performance intensive games which require the latest tech.

    To your point about iPhones being accessories, we dont generally walk around with iPads visibly in our hands so they are less likely to be viewed as jewelry.

    In order to push new sales of iPads Apple will need to put out software that heavily utilizes the newest tech. But you don’t want to make a 3 year old iPad obsolete because that’s still a big selling point for many users.

  15. axecop says:

    “a significant factor for more mainstream consumers is wanting to be seen using the latest shiny new toy.”

    I’m sure you have a statistic or two to back this up? Else, retract such superficial “opinion”. Or call it your opinion, not a “factor”…

  16. Nick Senn says:

    I wanted to buy the new iPad Air (first tablet ever), however I was put off by the small screen size; I want a 12″ or 13″ real estate (Air is too big to be carried around or put into a male bag) and to small for at home.
    Second very big minus was the lack of a “storage drive” that can interconnect to a PC or a phone as such (I don’t use iPhone). Third downturn was only one app/time.

    • Ben Lovejoy says:

      Storage is much less of an issue these days – with iCloud, Dropbox, etc, getting things between a tablet and PC is very easy.

      • Nick Senn says:

        I agree; however it’s not that instantaneous as with a PC (connecting my camera to transfer pics); an USB port is missing and that is also very unpractical.
        Anyway, I hope on the Ipad-Pro version; Samsung’s new 12.2″ tablet looks nice, however their products are usually done really halfway.
        Tablet space is still lacking true competition; at least in the upper price segment.

  17. I won an iPad2. I was going to wait until Retina iPad (iPad 3). I still use the iPad2 and it works mostly fine. This replaced an aging PC laptop. Another issue is the iPad is a multi-user device, more like a PC. a Phone is individual.
    I had an iPhone 4…replaced by 5S by work…who later took phones away from employees so back on the 4 until the next phone release. Though I would like a new iPad, the new iPhone will be my choice. then holding off until I have enough cash for a new iPad…BUT I have to then see how the 2009 iMac is doing if I need to upgrade that instead of a new iPad.

  18. Smartphones replace many other electronic devices that people used to carry. The list is massive because of what apps can do, but here’s a short list of standard functions: camera (photos & video), music/video player, PDA (contacts, calendar/reminder, notes, calculator, etc.), GPS, e-book reader, flashlight, voice recorder, watch/timer, pedometer, portable game player, etc. Of course internet access (via browser or app) allows people to keep up with Facebook, Twitter & dozens of messaging clients.

    All these use cases for the iPhone, more than carrier subsidies (total red herring), make it more valuable than the iPad to the average consumer. As the article rightly pointed out, higher usage times also means more frequent device replacement. The iPad will always be 2nd to the iPhone in terms of revenue/profit generation for Apple, but there is still plenty of growth left in both markets.

    Remember that some “analysts” have been predicting high-end smartphone saturation for a few years already. They’ve been wrong so far, at least in terms of iPhone sales. The iPhone is 7 yrs. old, iPad 4 yrs. old. Traditional PCs took decades to reach saturation. These are early days yet in the post-PC era.

  19. ricardogomez297167426 says:

    I agree with many of the comments… Many people haven’t upgraded their iPads. Because they work perfectly fine! That’s a quality product.

    When I speak to someone who uses a tablet other than an iPad, they bought it based on price or screen resolution. But more on the former rather than latter. Frankly, I don’t think Apple needs to go after those customers. Apple products last and are useful for a very long time.

    If anything, have older products available for a lower price. I think the iPad 2 is still a great tablet.

  20. rlowhit says:

    It could also be said that most people dont realize the full cost of their phone as it’s payment is spread out over two years with their telecom bill. If people paid for the phone upfront and then a smaller monthly I think the psychology would be to keep the phone longer than two years as well.

  21. I actually think the smartphones have more or less reached the “good enough” level which means the next new model will not provide enough incentive to upgrade from the current generation for a lot of people. Example: My wife is using an iPhone 4s which she’s had more or less since it was released and it’s still working perfectly and until it breaks, it will not be replaced.

    If I had an iPhone 5s, more or less the only way they would get me to upgrade would be if the iPhone 6 had seriously improved battery life.

    Perhaps I’m just old ;-)

    • In regards to iPads, I can see people upgrade to get better performance and more storage as they are used for more serious stuff compared to iPhones (Lightroom Mobile being an example though it is seriously crippled because of IOS restrictions).

    • airmanchairman says:

      I don’t know, there is something desirable about the glassy chunkiness and heft of the iPhone 4/4S model, a je-ne-sais-quoi that’s hard to put into articulate words in spite of the superiority of the 5 model, that suggest that until it becomes too long in the tooth iOS-software-wise it’s going to be around for a long long time.

      This is the likely handset that Apple will use as a lower-priced buffer against the race-to-the bottom competition for years to come. A future all-time design classic, I’m sure.

  22. I recently sold my 2006 MacBook Pro and still got about 30% of its original price. I now have a 2010 MBP that I plan to sell this year and am still hoping to get about 25% of its value back. I also recently sold my iPhone 4 for about 45% of its original price after 3 years of use.

    The point is:

    I believe there is a right time to upgrade every gadget where you can get most resale value out of it and spend just a small additional amount to upgrade. Think of the money spent as a rental cost for the number of years you have owned it and you will find the right time to upgrade. Based on the above theory, for me the upgrade cycle for a MBP is about 5 years, iPhone is 2.5 years and iPad is about 3 years.

  23. kpom1 says:

    Of course, this is also a challenge for Samsung, Google, and Amazon. Right now all the growth in the tablet market is in the sub-$200 market where there is almost no margin. At some point even that will slow down, since those users are even less likely to upgrade regularly.

  24. I think the issue here is that the form factors for the iPad Air and 2nd gen iPad mini are just about perfect anyway–there’s not much else they can do other than add Touch ID, a faster system on a chip (SoC), and 802.11ac Wi-Fi support. As such, I see iPad sales plateauing over the next few years.

  25. I’ve had an Android device and have on occasion thought about switching back to iPhone based solely on the quality of the apps… but then this morning I was reminded by the fact that Android has more features that just come in handy. For instance, I wanted to look at my bank account and tally some charges. I could do this on Android using my browser and a note-taking app at the same time (multi-tasking)… I would never be able to do this on an iPhone.

    The above example is just one feature that the iPhone lacks among many others. It’s one example why iPhone will continue to lose market share to Android. I love the stability of iPhone, but the lack of features and customizeability, i.e., usability of the device is seriously lacking. Apple will soon realize how detrimental its closed system is on a smartphone, just like when its computers once fell short in usability as a PC in the 90′s. You’d think they’d learn from its history but apparently their focus is miopic.

    • airmanchairman says:

      Never say never, dude. If you’re up to date with iPhone technology you’d realise that’s easily done in iOS as well via browser, note taking app and multi-tasking, as it has been for years now. In addition, a lot of iOS apps actually have ALL that that functionality built in, such is the richness of the iOS platform, anyway…

      And by the way the word’s MYOPIC, as may well apply to your opinion.

  26. Actually, I think this may be understating the case somewhat. The only reason PC’s got replaced so often in their heyday was a combination of OS/malware decrepitude and increasingly demanding software. The more tablets behave like the appliances they are intended to be, the less pressure there is to upgrade. An appliance is designed to the same thing with minimal maintenance over its whole lifespan. If I had a task that was too much for my iPad 3, I wouldn’t rush to buy an iPad Air, I’d do that task on my PC. So I will probably keep the iPad at least as long as the PC. It’s easier to justify the PC upgrade as work-related.