More Tablets, Cellphones Slated To Debut At CES

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Rising sales are prompting more vendors to enter the cellphone and tablet markets at next month’s International CES, where the Android OS will dominate the introductions in both platforms.

At least two vendors, including ViewSonic, will enter the U.S. cellphone market at the show, where Verizon Wireless is also expected to introduce smartphones and other portable devices, including video-optimized devices, incorporating 4G LTE (Long Term Evolution) wireless-data technology.

Analysts doubt that Verizon will launch its own iPhone at CES, expecting that announcement to come at an Apple-organized event.

Most of the tablets on display will use the Android OS; some will come with embedded ATSCM/ H (Mobile/Handheld) DTV tuners to turn them into mobile TV sets; and at least one will feature glasses-free 3D.

About 35 companies will show tablet products or prototypes at the show, Yankee Group analyst Dimitriy Molchanov believes. Some of these companies — such as Creative Labs, Augen, and ViewSonic — announced their newest products in late 2010 and will show them for the first time to the industry at large.

At least three other suppliers will come to the show with expanded selections, and at least nine, and possibly 12, vendors will enter the U.S. tablet market at the show, TWICE found in an unscientific survey of vendors planning to show tablets at the show.

Many of the new tablets will feature a 7-inch display compared to the iPad’s 10-inch screen, and by mid- 2011, said Strategy Analytics director Peter King, “we should have a reasonable feel as to whether consumers will opt for the more portable screen size or stay with the industry benchmark 10-inch display.”

Sales of cellphones are also rising, but not at the pace of tablets. Strategy Analytics projects 2.6 percent growth in North American cellphone unit shipments in 2011, matching its projected 2010 growth rate.

Cellphone sell-in grew in 2010, thanks to the economic recovery, smartphone demand that accelerated the replacement cycle, net-new subscriber growth, and expanding prepaid options, marketers told TWICE.

The value of cellphone shipments could grow faster than unit growth, given the growing share of smartphones. Strategy Analytics projects that smartphones’ share of unit cellphone sell-through in North America will grow to 42 percent in 2011, from 35 percent in 2010.

The rapid growth of smartphones is driven by demand at both the low and high ends, said analyst Alex Spektor. At the high end, “superphones are resonating with consumers looking for a premium-PC-like experience on the go,” he said. “Operators are eagerly allocating shelf share and subsidy-share to superphones because of their ability to attract customers and drive data usage. Handset vendors are attracted to the high gross margins and strong volume growth of superphones.” He defined superphones as offering screens that are 4 inches and larger and processing speeds of 1GHz or more.

At the low end, carriers are making smartphones available at low price points for the first time this year because the phones require lower subsidies yet still drive data usage and potentially attract consumers looking to upgrade from feature phones, he said.

A growing selection of smartphones arriving next year will feature 4G high-speed wireless-data technology, but 4G will also become a key feature in such connected devices as tablets, mobile hotspots, e-readers and other machine-to-machine [M2M] devices, marketers told TWICE.

4G will also open up the market for entertainment services to the handset, with Verizon Wireless having already said that video would play a key role in its 4G service, launched in December, marketers said.

Tablets will also play a role in the 4G plans of Verizon and other carriers, marketers said, given tablets’ growing popularity. Strategy Analytics projects U.S. retail sales of tablets will hit $6.84 billion in 2010, rising 40 percent in 2011 to $9.6 billion in 2011 before falling to $9.1 billion in 2014 as unit sales continue to grow but prices drop, thanks in large part to carrier subsidies. “The [national] retail selling price will be almost half of what it is today by the end of 2014,” King said.

In 2010, the company forecasts 11.4 million tablets will be sold at retail in the U.S. with an average selling price of $600. Of that, Apple will maintain a 75 percent unit share and 78 percent dollar share in the U.S.

Worldwide, 40 separate manufacturers by November 2010 were offering 60 tablet SKUs, and the list is growing each month. About 75 to 80 percent of those SKUs will hit U.S. shores, King predicted.

Tablet demand is strong, King said, because consumers were “impressed by the footprint together with the innovative and compelling user experience, particularly for browsing and media consumption. Enterprises and vertical markets have also been impressed. “Many large corporations are trialing tablets, and many more will do so when more enterprise-oriented tablets such as RIM’s Playbook appear on the market.” Many enterprise executives view the tablet as a larger communications device rather than a smaller computing device, he noted.

If the explosive tablet growth continues, further cannibalization of the e-reader market is inevitable, King added. “Dedicated e-book readers have already been hit, resulting in significant price erosion during 2010 and the introduction of hybrid models offering some level of multimedia, even if only web access.”

Tablets will also slow netbook growth, he noted. “The strong rate of growth enjoyed in the netbook market (168 percent in 2009 and 41 percent in 2010) will slow and do well to achieve double-figure percentage growth in 2011. While such strong early growth is rarely sustained, we cannot overlook the fact that despite being considerably more expensive, the tablet does provide a challenging alternative to the netbook, especially to those who were considering a netbook purchase due to its portability.”

The tablet “is a real alternative” for consumers who would have previously bought a netbook to access the Internet or email but not needing the productivity applications. For these consumers, the tablet is “the perfect coffee table solution.”


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