Will Tablets Cannibalize Smartphones, or Will Smartphones Displace Tablets?

The extent to which larger-screen smartphone devices are cannibalizing sales of tablets is unclear, but possibly quite important, in at least some markets.

But the reverse might also be happening in some markets, namely tablets cannibalizing smartphone sales. That might be an odd or unexpected development.

But the developing trend of larger-screen smartphones and smaller-screen tablets likely fuels the divergent trends.

In some cases, where consumers cannot afford both a smartphone and a PC, they might be choosing a tablet.

In other cases, the choice might be more an instance of “which device do I carry with me?” Sometimes, the choice is “which two devices do I carry?”

Once tablets get mobile network capability, including voice, and smartphones get bigger screens, the choices might be harder.

Consider that sales of voice-enabled tablets that are able to use the mobile network reached 25 percent of total in the Asia/Pacific (excluding Japan) region in the latest quarter, according to International Data Corp. analysts.

That represents annual growth of 60 percent. That suggests many end users in this region are looking for a single device that can meet their needs in terms of voice communication and media consumption.

For some that single device is a tablet and not a smartphone. For others, a smartphone with a larger screen might provide the same functionality.

In other words, in some markets, smartphones might be cannibalizing tablets, while in other markets tablets are cannibalizing smartphones.

That might account for the unexpected slowdown in tablet sales recently. In North America and Europe, most people who find value in tablets seem to have bought them. At the same time, more users might find that a larger-screen smartphone is a reasonable substitute for a tablet.

In some parts of Asia, consumers seem to be viewing tablets as substitutes for smartphones, at least in some instances.

Perhaps the growing market confusion in the ground between the smartphone and the PC is why the tablet market is growing quite a lot more slowly than originally expected.

IDC has lowered its worldwide tablet forecast for 2014 to 6.5 percent, down from the prior 12 percent, a reduction of about half.

In May 2014, for example, IDC lowered its forecast for tablet sales to 12 percent annual growth, from an earlier forecast of 52 percent.

IDC says two different trends are at work. “First, consumers are keeping their tablets, especially higher-cost models from major vendors, far longer than originally anticipated,” IDC said. That means the replacement cycle often seen in the smartphone market, where consumers upgrade every two years or so, does not seem to be as prevalent in the tablet market.

"Second, the rise of phablets--smartphones with 5.5-inch and larger screens--are causing many people to second-guess tablet purchases as the larger screens on these phones are often adequate for tasks once reserved for tablets," IDC said.

Sales of tablets  in North America and Western Europe will be flat in 2014, while the remaining regional markets will generate 12 percent unit growth over the same period.

In the past, whether tablets displace PCs has been a question.

The new question is whether tablets displace smartphones, or smartphones displace tablets. It isn’t clear yet which question is more germane.

What might be clear is that the tablet category might be in flux. Perhaps we used to think tablets displaced PCs. We might now be asking whether tablets displace phones, or phones cannibalize tablets.

That, at least, would explain why tablet sales growth rates are dropping so fast.

Tablet Year on Year Growth

Region	2013 Actual	2014 Forecast	2018 Forecast
North America + Western Europe	25%	0%	4%
Rest of World	88%	12%	5%

Source: IDC Worldwide Quarterly Tablet Tracker, August 29, 2014

Note: Total tablet market includes tablets plus 2-in-1s.