We may want to file this one in the so-obvious-it-doesn’t-need-an-analyst department: the tablet sector may be en route to a shakeout later this year. JP Morgan analyst Mark Moskowitz wrote in a report released Wednesday that competitive pressures put on companies by the iPad 2 might be enough to cause the “bubble” to burst.
Let’s face it, CES 2011 was a sea of tablets from just about every company known to man. I’ve heard some accounts that the number of devices shown off the show was near a hundred, so it’s obvious some will fail in the marketplace or not even see the light of day.
Now, it could be argued that most of what’s new in the the iPad 2 involves adding features such as cameras and a dual-core processor that are becoming default tablet checklist items. But even if the iPad 2 isn’t the tablet with the most features or the fanciest specs, it’s the most reasonably priced one.
Moskowitz said that JP Morgan expects a staggering 81 million tablets to be manufactured this year alone, with only about 47.9 million actually getting shipped to retailers. Even if the manufacturers miss JP Morgan’s projections on production by 20%, there will still be an oversupply of nearly 36% — quite a few manufacturers may be about to take a financial bath.
Another risk is to parts suppliers. These folks will be struggling to meet demand at first, then may be stuck with components they can’t sell later. While this may be a bad thing for the suppliers, it could be good for the consumer: oversupply will cause component prices to drop, and may translate into lower tablet prices later this year and into 2012.
Just a side thought: I’m willing to be that Black Friday 2011 may be about the ridiculous prices for tablets — these companies are going to need to get rid of all that excess inventory somehow.