Is Apple's Falling Tablet Market Share Cause for Concern?

It looks like iPad hegemony is on the decline. Market researcher IDC has just released its preliminary estimates on tablet shipments in the fourth quarter, and Apple is giving up some ground in terms of market share as competition escalates.

The iPad maker's share of the booming market is now just 43.6%, a sequential decline from the 50.4% share it grabbed in the third quarter. Google Android is gaining ground, but not all of those unit shipments are benefiting the search giant directly, since Amazon.com ranked No. 3. Barnes & Noble has now cracked the top five with its Nook tablet, which also runs a heavily modified, or forked, version of Android.

Vendor

Q4 2012 Shipments

Q4 2012 Market Share

Apple

22.9 million

43.6%

Samsung

7.9 million

15.1%

Amazon

6 million

11.5%

Asus

3.1 million

5.8%

Barnes & Noble

1 million

1.9%

Others

11.6 million

22.1%

Total

52.5 million

100%

Source: IDC. Figures may not sum due to rounding.


A year ago, Apple had a market share of 51.7%, so in percentage terms that's a big drop. However, remember that the broader tablet market is exploding, and soared by 75% in units to 52.5 million. Since tablet adoption is on the rise, a drop in market share can still come with a big jump in iPad units sold. Apple shipped 22.9 million units in the quarter, a 48% increase from a year ago.

Make room for Sammy
Much like how Samsung has made progress in the smartphone market, it's doing the same in the tablet market. Some of the South Korean company's gains come from Microsoft Windows 8 tablets along with its usual fare of Android gadgets. Samsung saw total unit shipments skyrocket from 2.2 million in Q4 2011 to 7.9 million in Q4 2012, enough to grab it 15.1% of the market.

The new Kindle Fire HDs were also bound to be a big hit, following in the success of the first-generation model. Amazon's Android tablet saw 6 million units move during the holidays, which is more information than you'll get from the company itself other than its claim about it being the "#1 best-selling, most gifted, and most wished for product." Investors want actual unit figures, Bezos, and they'll get them one way or another.

Good news and bad news
Asus has also become a major player, thanks to its partnership with Google making the Nexus 7. The 3.1 million units that it shipped ranked Asus the No. 4 vendor with a 5.8% market share. Perhaps more importantly, if you cross-reference that total with CFO David Chang's statements in November that the company is now building approximately 1 million Nexus 7 units per month after ramping up production, that suggests that the Nexus 7 comprised the vast majority of Asus' tablet units during the fourth quarter.

That's a double-edged sword for Asus, since there's no way that Asus is making much money on the device at $199 and is likely assuming the role of merely a contract manufacturer. That also implies that Asus' other tablets are faring rather poorly, including its higher-end Transformer series of Android tablets that compete directly with the iPad.

There's a reason why most hardware OEMs aren't venturing down to the $199 price point: because it's not profitable.

Don't worry
While ceding some market share certainly isn't a good thing for Apple, it's still by far the top tablet vendor with a 28.5% lead over its runner-up. Looking at the bigger picture, IDC also recently estimated that the broader tablet market would soar to 282.7 million units by 2016, with roughly half of those being iPads.

That would make the iPad a $56 billion business in just three years. Apple doesn't have anything to worry about quite yet.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

The article Is Apple's Falling Tablet Market Share Cause for Concern? originally appeared on Fool.com.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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