CES 2011: CEA Market Assessment

CEA put its forecasting hat on and presented interesting data on the market and trends around smartphones and tablets. Here is a summary of some of the points made by CEA in its evaluation of the market for smartphones and tablets.

• The fastest growing category is eReaders at 212%, then tablets at 71% and smartphones at 31%.
• Smartphones have reached 39% penetration in the US and this compares with 31% of portable game machines. Cellphones are at 91% penetration. The significant news is that in only one year Tablets have achieved 8% – an unusual accomplishment.
• CEA has begun to watch for early market trends by watching chatter in blogs and the social networking sites. These methods can provide an early indication of trends.
• CEA forecasts phone sales being relatively flat from 2011 to 2014 rising from 152m unit to 165m units. Meanwhile smartphones will climb from 72m units to 100m.
• The % of very satisfied consumers for smartphones is 79% and only exceeded by Laptops, Blu-ray and motion sensing game controllers.
• The highest rated activities on smartphones are taking pictures and email followed by news.
• In the category of likely to very likely future activities on mobile web is pay bills/ ecommerce (62%) and streaming video (50%). It is interesting that getting access to files on the home computer network was at 47%.
• One user perspective stood out – When asked “Is a mobile internet connection more useful when the device has GPS or location services?” the response was 64%.
• In a vehicle, the most used feature on the smartphone is navigation at 40% and well above email at 26%.
• Tablet sales forecast for the US, by CEA, begins at 10.3m in 2010, rises to 20.5m in 2012 and then levels to 21.8m and 22.1m in 2013 and 2014 respectively.
• 82% of tablet owners have a laptop/notebook.
• 52% of the tablet owners felt the touchscreen made the tablet easy to use. 31% stated that the tablet would become their primary computer.
• 94% of the tablet users used the tablet to browse the internet.
• 44% of the tablet owners have 30+ apps on the tablet.
• 96% of the tablets are connected to the Internet over WiFi at home and 82% connected the same way out of the home. Only 26% use tablets with a carrier.
• CEA stated that a game changing assessment by consumers was that when asked – Do apps remove the need to buy separate CE devices? 26% said Yes.
• The eReader market is expected to peak about 15m units a year in 2013. In 2010 6.6m units were sold.

During the talk CEA speculated that there is likely to be competition between the carriers on broadband data plans, even including competition on pricing.

Assessment

We question if the Tablet forecast, where the market peaks out in 2013, reflects the likely market dynamics. As discussed in earlier reports some of these factors include:

Increasing emphasis on application specific tablets. The eReader is just one we see today but there will be many more. This will trigger the purchase of multiple tablets per household. Today some households have both an eReader and a tablet and this proliferation will accelerate as the tablet variations grow.

Continuing erosion in price. We estimate that a quality tablet will be on the market for <$100 at the end of 2011. The tablet market is likely to be highly elastic, at least in the early years and the analysis does not seem to reflect this.

Rapid obsolesce of tablet generations. The market pace will be such that last year’s tablet is seen as dead weight. The innovations will be in software, application specific tablets and price. Tablet innovation velocity will not be bounded by Moore’s Law. The biggest innovation area, in terms of cost and performance, will be in the screen.

A major uncertainty in the tablet market is the role of the carriers. The more tablets which are sold by them the greater the likely barrier in the market for rapid growth. Using artificial pricing, contract lock-ins, controlled platforms and preloaded junk the carriers could be a force which retards an open market. CEA’s speculation on competition for data plans between the carriers is good news, if it happens. However, the carriers have shown negative innovation on the pricing and marketing of data plans.