iPocalypse now?: iPad sales "collapse" and the Web freaks

Yet another case of using a single data point, of unknown accuracy, as the basis for a mare's nest of assumptions and biases about Apple products

Based on one market researcher's estimate of a one-month fall in 9.7-inch tablet display shipments, a range of tech news sites and bloggers are announcing, if not trumpeting, the apocalyptic "collapse" of Apple's iPad sales.

It's yet another case of using a single data point, of unknown accuracy, as the basis for a mare's nest of assumptions and biases about Apple products.

[Our hands on test -- Tablet Wars: Microsoft Surface RT v. Apple iPad]

The data is from David Hsieh, an analyst with NPD's DisplaySearch unit who blogged some excerpts from a new report - the "Monthly TFT LCD Shipment Database" -- on the company's website. Keep in mind that the full-size iPad is the only popular tablet using the 9.7-inch diagonal display.

The blogpost's key passage - the one being seized upon by the tech sites - is this: "Shipments of 9.7" tablet PC panels collapsed, falling from 7.4 to 1.3M, while 7"and 7.9"panel shipments grew rapidly, from 12 to 14M....The January panel shipment data may be an indicator for 2013, starting with Apple's product mix shift."

It could also be an indicator of a host of other things. It's important to keep in mind that this is DisplaySearch's estimate, based apparently on talks with various component suppliers in Asia for only one month. DisplaySearch did not respond to an email asking follow-up questions on Hsieh's blogpost.

The Web reaction to Hsieh's estimates are eerily reminiscent of the January reaction to equally apocalyptic speculation that Apple's iPhone 5 sales were also "collapsing," because of an exactly similar claim that Apple had sharply decreased its order for iPhone 5 displays. [See Forbes' contributor Mark Rogowsky's dissection of the assumptions and misreporting in that case.]

"Sales for iPad collapse: Report says iPad mini may be the culprit" screams the headline at Examiner.com. 

The writer, Frank Ling, accepts Hsieh's numbers at face value, apparently without actually thinking about them. He concludes that "as these full-sized tablets started to become more popular, the consumer trend was going in the opposite direction towards smaller-sized tablets."

"With the huge success of 7-inch tablets such as Amazon's Kindle Fire HD and Google's Nexus 7, Apple could no longer stand by its original founder's wishes and moved into the niche of small tablets," he declares. "The iPad mini now outsells the iPad 4 and no doubt, Apple has more plans to produce smaller tablet sizes that will probably go down to 5-inches...."

The usually more thoughtful Sameer Singh, who analyzes the mobile market at his TechThoughts blog, also accepted and repeated the "collapse."

"Unless Apple has a new full-size iPad on the way with a 10.1" display, this strongly hints at a collapse in sales because of cannibalization from the iPad Mini," he writes. "My iPad Mini cannibalization estimate was far more aggressive than others, but actual cannibalization seems even worse."

He believes it "strongly hints" at collapse because he believes that display shipments, by manufacturers to OEMs, are a reliable indicator of future shipments of the finished tablets. But the question here is whether a one-month decrease is a response to crashing iPad retail sales, or one of a multitude of possible tweaks to Apple's complex supply chain.

Every "estimate" of cannibalization - which means in this case the number of people who opt for buying an iPad mini when, without that product, they would have bought a full-sized iPad - is just that: an estimate, based on a set of assumptions about how tablet buyers will behave.

Regarding the "iPad collapse," Matthew Panzarino, at his RobotTuxedo blog, quotes Apple CEO Tim Cook, who commented on the January speculation about collapsing iPhone sales: "I'd also stress that, even if a particular data point were to be factual, it would be impossible to interpret what that data point means to our business. Our supply chain is very complex and we have multiple sources for our components. Yields can vary...supplier performance can vary. There's an inordinate list of things that would make any single data point not a great proxy for what's going on."

What's missing now is exactly what was missing then: more comprehensive, not to mention reliable, data about inventory, about changes in suppliers or supplier relationships, changes in manufacturing processes or yields, or changes or adjustments to display technologies, to name just a few.

Hsieh follows with his statement about display shipments with this: "As we noted in December, Apple had planned to sell 40M iPad minis (7.9") and 60M iPads (9.7") in 2013. However, the reality seems to be the reverse, as the iPad mini has been more popular than the iPad. We now understand that Apple may be planning to sell 55M iPad minis (7.9") and 33M iPads (9.7") in 2013."

But Panzarino adds in his own blogpost an important qualification to Hsieh's assertions.

"Only one problem: Apple never announced any such plans of any sort," he writes. "I'm sure that Apple planned to sell a certain amount of both models, but it never reveals those estimates publicly. In fact, it has become even more conservative in its forecast reporting in an endeavor to halt projection inflation."

Since the release of iPad mini in Fall 2012, Apple so far has reported "iPad sales" without breaking them down by screen size.

VentureBeat's John Koetsier read Singh's post, and then posted his summary of it. He, too, used the word "collapse" in his headline.

"Obviously, this is potentially a shocking and catastrophic event for Apple," he wrote.

But maybe not. Koetsier says there could be two other reasons that these display shipments are "vastly down."

"One is that Apple is selling far fewer, or planning to sell far fewer, and so buying fewer displays," he writes. But if Apple is "selling far fewer" iPads, then sales have "collapsed" and this actually is a "shocking and catastrophic event" for Apple.

"Another is that Apple is switching product mix and, perhaps, completely updating the iPad product line ... and therefore ordering different sizes of tablet displays, which might just be coincident with some popular Android tablet sizes and which, therefore, would look very much like Android tablets in the DisplaySearch numbers."

This hypothesis at least has the merit of addressing some of the complexity inherent in a modern supply chain for a product like a tablet computer. But essentially, Koetsier is saying that Apple might abandon the presumably failed 9.7-inch display in favor of screens that are 0.3 or 0.4 inches bigger, such as a10-inch screen (used by Google Nexus 10) or a 10.1-inch screen (used by Samsung Galaxy Note 10.1 and the Asus Transform Pad Infinity). Or possibly he means a new full-size iPad that would be smaller, with an 8.9-inch screen (used by the Galaxy Tab 8.9 and the Amazon Kindle Fire HD).

There is no evidence of such a change. Apple can continue to refresh the iPad with improvements to the display technology, graphics, the processor, iOS improvements and changes, iCloud innovations and the like, without ever having to change the screen's size, a change which create a wealth of problems for displaying, and developing, iPad apps.

People buy the iPad or iPad mini to do one or more jobs, and those jobs are associated with either a larger or smaller screen. Sometimes those jobs include a smaller or larger screen.

One example of these buyer dynamics can be found at The Ottawa Hospital in Ontario. The hospital was a very early adopter of iPads, and now has about 3,000 of the 9.7-inch tablets. The purchases have slowed because the target "market" of physicians, residents, and some others has been largely covered, says Dale Potter, the hospital's senior vice president, strategy and transformation.

The hospital is currently piloting between 200 and 300 iPad minis, mainly with nurses and other staff such as physiotherapist. "The iPad 9.7 group are not interested [in the mini] as they want the larger screen," Potter says. "But nursing and allied health [professionals] like the [smaller] form factor, in which case we would look to ramp up something like 2,000 of the minis this coming year.

Until the iPad mini's release, the hospital was looking at equipping the nurses with the iPhone.

As lawyers would say, is it possible that iPad sales could collapse? The answer is yes. But not on the "evidence" so far put forward.

John Cox covers wireless networking and mobile computing for Network World.

Twitter: http://twitter.com/johnwcoxnww

Email: john_cox@nww.com

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