The iPad market

Apple Pencil (2nd generation)
Apple Pencil (2nd generation) (Image credit: iMore)

Introduced seven years ago this month, Apple's late co-founder, Steve Jobs, said iPad had to fight for its right to exist between phone and laptop by doing some things better than either of the other two. Since then, Apple's ability to tell that story has varied from the heights of "technology alone is not enough" to... not at all. And that's led to a lot of theories about iPad and its future.

Tim Cook, speaking during Apple's Q1 2017 conference call:

The iPad, Steve, we had a 1.6 million unit swing on channel inventory between the years. In the year-ago quarter we increased by 900 [thousand], in this quarter, we decreased by 700. On top of that, and from an ASP point of view, in the year-ago quarter we launched the iPad Pro 13-inch — that would be the iPad with obviously the highest price on it — we would have done the channel fill plus the launch of the product, and so that would have bolstered the ASPs in that particular quarter. In addition to all of that, we did under-call the number of iPads that would be in demand for the quarter, and that compounded a shortage issue that we had with one of our suppliers. All in all, there was quite a few things going on there.

In other words, the 12.9-inch iPad Pro launched at the end of 2015 but no new iPad launched at the end of 2016, much less a high-margin one. Combine that with less inventory and shortages due to a supplier, and there was both less drive and less availability.

That takes the edge off the quarter but not off iPad in general, which by any measure isn't accelerating as fast as it did in the beginning. It was that initial acceleration — faster even than iPhone in its first years — that created incredible expectations around iPad. And it's those expectations which have now translated into incredible expectational debt.

The problem with acceleration is that it has no impact on speed limit. If you go from 0 to 60 in 3 seconds or in 6 seconds, and the speed limit is 60, you simply hit the limit sooner. iPad hit its current limit wicked fast.

In many ways, you could go so far as to say there's no tablet market, just an iPad market. In other words, people don't by tablets, they by cheap video/game players (which Apple wants no part of) or they buy iPads.

That's what Steve Jobs meant when he called iPad the future of computing. His dream, and the consistent goal of Apple over the years, from Apple II to Mac to iMac to iPad, was mainstreaming computer technology. It's also why Jobs spoke of trucks and cars. iPad wasn't a PC, it was something that the majority of people would eventually find more practical than a full-on PC.

iPad, at its core, made apps and the web accessible and approachable to people, young and old, who either couldn't, hadn't, or simply never enjoyed using a PC.

It's why other vendors who tried to use "full desktop OS", multi-window multitasking, Flash, and other traditional computer paradigms to compete with iPad failed so spectacularly always. It's also why Windows on a tablet wasn't considered a selling point but a detriment. The mainstream didn't want it. They wanted iPad.

That's why so many people not only bought an iPad 2, or one of the iPads since then, but have held onto it. It's not just as much computer as they needed, its as much computer as they wanted, and they'll use it until it breaks down and stops being usable.

That's very different from the iPhone market where people upgrade every couple of years, give or take. It's closer to the Mac but, thanks to it being even more of an appliance, likely has an even longer lifespan. (And the initial acceleration that comes with a new product category being launched stuffed that cycle early.)

So, while the popular narrative is that iPad is failing, a counterargument could be made that iPad succeeded too well, too fast. It's the old PC "good enough" problem writ large.

We've also now had three generations of iPhone Plus putting pressure on iPad mini from below and two generations of MacBook putting pressure on iPad Air/Pro from above. The fight for the in-between has only gotten tougher.

Still, even this quarter's numbers, hamstrung as Tim Cook explained them to be, need to be considered carefully: iPad sold 13.1 million units, Mac sold 5.3 million.

The Mac tends to hold steady even as the PC market continues to decline, and iPad accounted for more than double the sales of the Mac.

That makes it hard to imagine the solution to the iPad problem is really making it more Mac-like — i.e., more like a traditional computer. That's different than simply making it more powerful by continuing what iPad Pro and iOS 9 started and adding more features like drag-and-drop and easier filesystem access. Personally, I'd love the former (I've argued for an iPadOS for years), though not so much the latter. Opinions vary on that, of course.

Either way, though, that only solves for "us" — for the tech niche. It adds a relatively small adjacent market to the overall iPad market but does little to for the mass mainstream market. Likewise, making bigger again iPads. That'd be great for creative professionals who want a digital drafting or drawing table, and I'd love it lots, but it also only solves for a small niche.

In order to incentivize mainstream iPad sales, Apple will need to create compelling features for the mainstream that spur upgrades in spite of current hardware being good enough. And that's a real challenge.

Most people don't upgrade PCs unless they have to either. Gamers are a notable exception but the types of games that are most popular on iPad aren't typically the ones with the highest hardware requirements.

Many people do upgrade phones even when they don't have to. That typically comes from features that are compelling on phones, especially better cameras, and from carrier or retailer incentives. It's unclear iPad benefits in the same way from things like camera enhancements, which the 9.7-inch iPad Pro got last spring, and the new features that are compelling, like Apple Pencil and Smart Connector again play more to the niche than the mainstream.

Apple offers an iPhone Upgrade Program to, which is similar to a lease and offers a new phone yearly, but whether or not an iPad Upgrade Program would work is an open question. (And Apple would have to stick to a yearly upgrade cycle, which may not always match their roadmap.)

Tim Cook again:

If I sort of zoom out of the 90-day clock and look at it, we've got some exciting things coming on iPad. I still feel very optimistic about where we can take the product. When we look at the number of people buying iPads for the first time — which is a good thing to look at from a point of view of whether things are reaching a penetration point or not — the numbers indicate that it's not close to that kind of thing. The customer sat numbers are through the roof; literally, the customer sat for the iPad Pro is 99%. It's stunning.And so I see a lot of good things and hope for better results, but we are still currently in this shortage issue now, and I'm not projecting to get out of that totally during the quarter. It will damper this [upcoming] quarter somewhat. But again, beyond the 90-day clock, I'm very bullish on iPad.

Cook knows the future of iPad better than anyone on the planet and he typically says exactly what he feels and thinks. (I sometimes wonder if that makes things confusion to people not used to CEOs being so candid.)

There are new iPads coming — Apple isn't getting out of that business — and they'll be better than any iPad that's come before.

Short term, people who bought iPad 2 or iPad 3, the original iPad mini or Air will start to time out and the upgrade cycles will start to kick in.

Longer term, Apple will have to decide if they want to keep iPad aimed squarely at the mainstream, if they want to continue to explore the pro niche, or if they can do both — If they can avoid making it a truck but somehow nail iPad as SUV.

For that, we'll have to wait and see.

Rene Ritchie

Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.