Apple Inc. (NASDAQ:AAPL) strategized itself into ignoring the “netbook” space when that was the big thing in the tech world years ago, and it worked out well as Apple brought to market the iPhone that revolutionized the smartphone market, and later the iPad, which essentially introduced the tablet market. So what would happen if those two devices were thrown into a blender to create a new market segment?
You have the “phablet,” a hybrid of a phone and tablet – a term that was coined by those in the tech press who were, to put it mildly, skeptical of this new device. The device, which is defined as a larger phone/smaller tablet with a phone that measures between five to seven inches diagonally. While the new iPhone 5 by Apple Inc. (NASDAQ:AAPL) is closer to that size, as is the newly released iPad Mini. But Samsung is the first major brand to produce a so-called “phablet” with its Galaxy Note, which has been immensely popular (10 million units sold by the end of summer 2012).
And a recent story in Reuters predicts that the “phablet” space is due to explode in the next couple of years, with it becoming a $130 billion segment by 2015 (which would mean 70-percent growth each year until then), and that more than 140 million of these devices are due to move in 2013 and more than 400 million in two years.
With those numbers, and Samsung introducing the Galaxy Note II recently that has already cleared 5 million sales, and with several other companies due to launch their own phablets (HTC, Huawei, Vizio, LG and Lenovo as examples) in the coming months, there is a begging question for the growing segment: Will Apple Inc. (NASDAQ:AAPL) jump in anytime soon?
While it doesn’t seem so, as there is word that Apple Inc. (NASDAQ:AAPL) is working on a smaller iPhone, which goes in the opposite direction of the phablet, and there is not much talk of a larger iPhone or a tablet smaller than the iPad Mini. Does Apple think the phablet will go the way of the netbook? There are several reasons cited as to why the phablet segment will be different, and thus something for Apple to take seriously:
1. Especially in emerging markets (China, Brazil and India), many consumers want one device that can do everything, because that is all many consumers can afford.
2. In established markets, many consumers don’t need phones more than they need bigger screens. Phablets can give them both. Surveys show that consumers spend two hours a day on average using their smartphones, but time spent on actual phone calls may be as small as 10 percent of that time (about 12 minutes a day).
3. In places like Asia, where accessing bandwidth is expensive, having one device that can be used to access cell networks rather than two would be economical.
4. Phablets, while not fitting well in many pockets, are still very portable and would eventually eliminate the need for consumers to carry separate phones and tablets in their purse, bag or briefcase.
With these reasons for expected staying power of the phablet segment, and the expected high-end characteristics of the devices – which would be in line with the production model of Apple Inc. (NASDAQ:AAPL), to be high-margin, high-end, state-of-the-art devices – might just be the catalyst for Cupertino to add yet another option to its smartphone/tablet lines, a device that connects the two.
Could it be a matter of time? Do you think Apple Inc. (NASDAQ:AAPL) will make the jump into phablets? Why or why not? We’d love to get your feedback.
As of 1:45 p.m. ET Wednesday, Apple Inc. (NASDAQ:AAPL) stock was down slightly from its open, trading at $522.40 per share.
DISCLOSURE: I hold no positions in any of the stocks mentioned in this article.
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