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Phablets Now Crushing Small Tablet Sales

Sales of smartphones with 5-inch-plus displays grew 369% in Q1

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While the iPad stubbornly remained a full-sized device, Amazon, Google (GOOG) and Samsung began releasing small tablets with displays between 7 and 8 inches. Smaller meant cheaper, and they were also able to leverage the portability compared to a 9.7-inch iPad.

Apple and many industry observers scoffed at these small tablets — just as they would later with phablets — but consumers ate them up. At half the price of an iPad, they were willing to live with a smaller display and Android. Apple was finally forced to cave in and released the iPad Mini, but by then it was well on the way to losing its dominance.

Like phablets, small tablets became the fastest-growing category in the tablet market. In 2013, IDC projected that tablets with a display of less than 8-inches would capture 57% of the total tablet market by 2017. (Those small tablet actually hit 58% for 2013, significantly outperforming IDC’s estimates.)

Phablets Are Killing Small Tablets

That was 2013. Now, the picture isn’t looking so rosy for small tablets and with those sub 8-inch devices driving growth — and it doesn’t look quite so good for the tablet market in general.

A recent report released by NDP DisplaySearch says that in Q1 2014 sales of tablets declined year-over-year for the first time ever.

The reason?

That previously hot small tablet category is taking a hit from phablet sales — and many people who buy a phablet don’t also need a small tablet. The trend looks so entrenched that, rather than expecting small tablets to be the majority of tablet sales in 2017, DisplaySearch is calling for them to drop to around 45% while the tablet market in general slows to single-digit growth.

We’re seeing some hard evidence of this trend in Samsung’s second quarter earning estimates. The company is expecting earnings to slide 24% compared to last year, and one of the reasons it spikes out is that the demand for 5-to-6 inch smartphones “cannibalized the demand for 7-to-8 inch tablets.”

Phablets are definitely here to stay. The question is, now that consumers have accepted the idea of talking into a smartphone with a 5-inch or 6-inch display, is there any chance phablets could get even bigger and not just cut into small tablet sales, but replace the devices altogether? It may sound ludicrous … but so did phablets themselves, just a few years ago.

We might find out soon. In what could be either the beginning of the end for the small tablet — or a manufacturer pushing things just too far — Asus announced an 8-inch phablet, the Fonepad 8 in June.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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