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A glance at the headlines over the past several weeks makes clear the battle of computing form factors continues to rage. HP announced it will sell or spin off its PC division, including its struggling TouchPad. Meanwhile, in India, Lakshmi Access Communications announced the launch of a new US$99 tablet computer. The tablet, which runs Google's Android OS and connects to the Internet using both Wi-Fi and 3G networks, comes only a few weeks after Bharti Airtel and Reliance Communications launched tablets to compete with Apple's iPad and Samsung's Galaxy Tab. In the United States, Intel said it would invest US$300 million in companies that develop new technologies for Ultrabooks, a class of thin and light laptops, signaling that the company believes there is still a market for the notebook form factor.
These announcements recall the debut of OLPC's ultra-low-cost XO laptop several years ago and the subsequent netbook craze. The netbook category, which took off and then promptly fizzled, was a response to demand for low-cost computing devices that were lighter, consumed less power and accessed most functions and content via the Internet. Yet its demise illustrated that fickle consumer preferences and technological convergence, especially coupled with the rise of mobile networks, can cause a category to stall just as quickly as it rose. Companies, like Intel, may be hoping that snazzy devices combining the best features of the tablet, smartphone and laptop form factors might help drive demand for devices packing its higher-margin processors. This is especially true in emerging markets where consumers may own just one or two devices and demanding more functionality from each device.
While it may be impossible to predict device trends with any accuracy (few foresaw the tablet boom), it is fair to say that only categories that address both a deep consumer need and align with market characteristics will have staying power. Purchasing power, evolving tastes and ICT infrastructure will continue to drive consumer decisions in both developed countries and emerging markets. A differentiated device strategy that caters to local market characteristics and needs can help multinational firms capitalize on convergence trends in diverse markets.
Each day seems to bring the announcement of a new tablet product by a major computer or mobile handset maker. Recent weeks have seen the launch or planned launch of new tablets by Research in Motion, Toshiba, HP and Dell. Since Apple's iPad was launched, the tablet has become the hottest form factor in hardware. Tablets were once a product category considered by some observers as a niche area, but manufacturers are now feeling the pressure to offer compelling functionality and sleek looks so as not to fall behind the market leader. This trend is not confined to developed markets. Lenovo, China's leading PC maker, announced but then recently delayed a "hybrid" unit that combines the functionality of a laptop and a tablet. The government of India sponsored the prototype production of a new $35 tablet that drew inevitable comparisons to the OLPC laptop. It has pleasantly surprised some reviewers with its performance, although considerable skepticism remains.
The flurry of activity in the tablet space recalls the explosion of interest in the netbook category several years ago. Netbooks took off in 2007 after the release of the ASUS Eee and the OLPC XO-1 on the premise that they were ideally suited to low-end consumers (especially in emerging markets) because of their lower price point and emphasis on accessing Internet content rather than hard drive-based content. In early 2009, ABI Research predicted that almost 35 million netbooks would be sold globally, with the total rising to 139 million by 2013. A year later, however, the tablet phenomenon happened, and netbook sales are now falling globally, which many are attributing to the rise of tablets such as the iPad.
Whether tablets (or other factors) are responsible for the slowdown in netbook sales, these events illustrate the dangers of making long-term predictions about the growth of products or product categories based on current sales data. This risk is particularly relevant in emerging markets, where young, urban consumers often want to be seen using the most cutting-edge devices. Sales projections based on current or historical trends can provide useful context for managers, but firms would be wise to supplement these numbers with a critical analysis of the broader ecosystem and underlying consumer needs in the markets in which they operate. Market intelligence that capitalizes on rich qualitative information can yield important insights on anticipated behavioral trends for key market segments.
