Google, Apple and Samsung are leading a sales surge in the worldwide smart connected device market – a category consisting of personal computers, tablets and smartphones – that should continue for at least the next five years, according to new research from US-based International Data Corp. (IDC).
The IDC’s Worldwide Quarterly Smart Connected Device Tracker found that global shipments of smartphones, tablets, portable computers and desktops reached a record 303.6 million, valued at $140.4 billion, in the third quarter of 2012, a 27% increase from the same quarter in 2011. Holiday sales will drive the market to new heights in the fourth quarter, with shipments forecast to hit 362 million units with a value of $169.2 billion, IDC said in a news release.
Smartphones and tablets are driving the growth in sales, a trend that should accelerate over the next five years as the global smart connected device market expands to more than 2.1 billion units, with a market value of almost $800 billion, IDC predicts. Shipments of smartphones will nearly double, to more than 1.4 billion in 2016, and will represent two-thirds of the market, up from 60% in 2012. Tablet shipments will soar by more than 130%, to 283 million units, as the market continues to shift toward smart devices that are smaller and less expensive than traditional laptops and desktops.
Exhibit: Smart Connected Device Market by Product Category, Shipments, Market Share, 2012–16 (shipments in millions)
The rise of Ultrabooks
While the number of desktop PCs sold will remain relatively flat through 2016, the emergence of Ultrabooks will spur an upward movement in portable PC sales. Ultrabooks are a class of super-thin but powerful notebook-style computers that fill the gap in terms of size and performance between tablets and laptops. IDC is still refining its projections for Ultrabook sales, but the current thinking is the category will grow from between 2% to 4% of portable PC shipments this year to between 40% and 50% in 2016, said Bob O’Donnell, an IDC vice president, said in a phone interview with CGMA Magazine.
“Ultrabooks are growing quite a bit,” said O’Donnell, who credits a couple of main factors:
- Consumers have realised that tablets are not designed to replace the PC, as evidenced by a “very dramatic” shift toward smaller tablets such as the iPad Mini.
- Ultrabooks combine the fast boot-up times of tablets with laptop-level computing power and, perhaps most important to CPAs such as auditors, a built-in keyboard.
The term Ultrabook was coined by Intel and can be used officially only by machines running on Intel chips, but competitors such as Apple’s MacBook Air compete in the same space.
Dozens of Ultrabooks coming on the market run on the new Windows 8 operating system. It would help Microsoft immensely if some of those products produced strong sales, because desktop dominance has not prevented Microsoft’s share of the smart connected device market from plunging over the past 18 months.
In the first quarter of 2011, Microsoft provided the operating system for 42% of the smart connected devices shipped, more than double the market share of any single competitor. In the third quarter of this year, that figure had fallen to 28%, as the rapid rise of smartphones and tablets recalibrated the dynamics of the market.
The main beneficiary of this shift has been Google, maker of the Android operating system, which has surged from 21% smart device OS market share in the first quarter of 2011 to 51% in the third quarter of 2012 thanks to its market-leading position in the smartphone space and rapid growth among tablets including Amazon Kindle Fire.
Apple’s money tree
Don’t feel bad for Apple, however. The company may have slipped in connected device OS market share, from 18% in the second quarter to 15% in the third quarter, but it is still raking in cash because it provides the entire device – hardware and software.
Among vendors of smart devices, Apple ranked second in shipments during the third quarter behind Samsung, which controlled 22% of the market with 66 million units shipped, essentially double year over year. Apple’s 46 million shipments represented 15% of the market and a 38% gain year over year. Another major mover in the space was Lenovo, which posted a 60% increase in shipments to 21 million, lifting the Chinese company to third place in market share.
While Samsung shipped the most devices, Apple led all vendors in value with a total of $34 billion worth of iPhones, iPads, and computers shipped during the third quarter. Samsung was second at $28 billion, with an average selling price (ASP) of its devices of $434, more than $300 less than Apple’s ASP, a robust $744.
Long term, IDC foresees the growth of smartphones and tablets lowering the overall ASP for smart connected devices, from $534 in 2011, to $378 in 2016. That’s good, because IDC also forecasts that consumers will continue to carry and use multiple devices.
Exhibit: Top Five Smart Connected Device Vendors, Shipments, and Market Share, Q3 2012 (shipments in millions)
—Jeff Drew (firstname.lastname@example.org) is a CGMA Magazine senior editor.
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