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2013 global tablet forecast

DIGITIMES Research Special Report

James Wang, DIGITIMES Research, December 2012

Introduction

• Based on analysis of the major platform companies and white box tablets, Digitimes Research forecasts that global tablet shipments will overtake notebook shipments in 2013, growing by 38.3% on 2012 levels to hit 210 million units; shipments of branded tablets alone are forecast to 140 million units.

• The aggressive pricing of the Nexus 7 and Nexus 10 is likely to give Google strong momentum in 2013. Digitimes Research projects that Google will become the number two large tablet vendor in one fell swoop, with shipments topping 19 million units. While Apple will retain the number one spot, its share of branded tablet shipments will decline to just 55.6%; factoring in white box tablets, Apple’s share of tablet shipments will drop to just 55.6%; factoring in white box tablets, Apple’s share of tablet shipments will drop to just 37.4%.

• The explosion in white box tablet shipments in 2012 means that Android will overtake iOS to become the largest platform in 2012. Combined shipments of all Android tablets –including branded, white box, Amazon and Barnes & Noble (B&N) devices – are projected to hit 121 million units in 2013, representing 40.2% growth on 2012 figures.

• Digitimes Research also projects that global shipments of branded and white box tablets will hit 320 million by 2015, with branded devices accounting for some 220 million units and white box tablets for the remaining 100 million.

• Note: Unless otherwise noted, the source of all charts and tables in this report is Digitimes Research

PDF issued on January 23, 2013 to Ms. Susan Wang, Procom Electronics IncMembership ref. ID: 201301220009

Definitions


Device definitionsProduct type Exterior design Definition

NB

Clamshell� Can be pivoted to an angle ≤180°� Dual screen type

Convertible� Sliding cover type� Tilting type, can be pivoted to an angle >180°

Tablet PC

One piece

� One-piece type, keyboard can be added but is limited to text input

� 5” plus with no cellular voice call functionality� 6” plus with cellular voice call functionality

� One-piece type with a detachable keyboard dock that adds

Detachable

� One-piece type with a detachable keyboard dock that adds additional features such as external ports, storage, batteries and even separate processors

Smartphone

� Includes touch panel and app store(s)� Large size is defined as less than 6” with cellular voice call

functionality� Modular type, for example where a dock or second screen can

be added

Portable media players

� Includes touch and non-touch screens� Screen size les than 5” for touchscreens

Note: Will include different processor architectures and operating systems in a single device.

0


Device definitions (1)

• The line between tablets and notebooks is likely to become increasingly blurred, while the share of shipments accounted for by products positioned somewhere between the two categories is likely to rise. For statistical purposes and in order to avoid double counting products/shipments in both the tablet and notebook categories, Digitimes Research uses the following definitions to differentiate tablet PCs, notebooks, smartphones and media players.

• Tablet PCs are defined as standalone mobile devices that may or may not have a physical keyboard; where there is a keyboard, it can be detached from the main device without impeding its operation. Tablets can be subdivided into one-piece and detachable products.

Keyboards may be used with one-piece products, such as Bluetooth wireless keyboards, or • Keyboards may be used with one-piece products, such as Bluetooth wireless keyboards, or the wired keyboard peripherals available for the iPad, which connect via Apple's proprietary connector; the functionality of such keyboards is essentially limited to text input.

• Detachable tablets consist of a main unit with a multifunctional keyboard dock that may include external ports, storage, and even separate processors, as well as text input functionality For example, some dual-OS models feature an ARM-based architecture in the main unit to run Android and an x86 processor in the dock to run Windows.

• According to this definition, the Windows 8 Pro and Windows RT versions of the Microsoft Surface, and detachable mobile computing devices running windows with an added x86 processor, are all classified as tablets and are therefore included in tablet shipment calculations.


Device definitions (2)• Notebooks may have processors situated in either the screen or the keyboard portion of the

device, but the keyboard and screen cannot be detached or otherwise separated. Notebooks can be subdivided into clamshell and convertible types.

• "Clamshell" means that the notebook's screen can be pivoted away from the keyboard at an angle no greater than 180 degrees; this category also includes dual-screen designs such as the Asus Taichi.

• The "convertible" category includes sliding and tilting designs where the screen can be pivoted at an angle greater than 180 degrees, such as the IdeaPad Yoga.

• Tablets and smartphones are primarily differentiated by screen size, with the dividing line set at seven inches. Thus, the Samsung Galaxy Note's 5.3-inch screen puts it in the smartphone seven inches. Thus, the Samsung Galaxy Note's 5.3-inch screen puts it in the smartphone category, while the Galaxy Tab 7 3G version's 7-inch screen qualifies it as a tablet, despite its voice call functionality.

• Seeing the success of Samsung’s Galaxy Note, some Chinese smartphone vendors are designing 6.x-inch smartphones. Digitimes Research grouped these devices into smartphone category so their shipments will not be counted in this report.

• Digitimes Research believes that these product definitions will enable different types of product to be more clearly distinguished, thereby helping to avoid conflicts with the definitions

• Digitimes Research defines tablet shipments as the number of units built for brand vendors by ODM/OEM manufacturers (unit build), rather than using alternative definitions such as brand vendors' shipments to channels (sell in) or actual sales to consumers (sell through).


White box tablet definition: Shipments mainly in China

Branded Tablets

Apple, Google, Microsoft, Amazon, B&N, Samsung,

White box tablets

White box tablets are mainly produced by companies with a background in white box handsets, netbooks, media

Definition and differentiation by industry

Grey area between white box Amazon, B&N, Samsung,

Asus, Acer, HP, Dell, Sony, HTC, RIM, etc.

handsets, netbooks, media players and digital photo frames, based in the South China region

Definition and differentiation in terms of brand recognition

white box and branded

tablets


White box tablet definition: Shipments mainly in China

• Digitimes Research figures for tablets previously counted only branded devices, but now also include white box tablets.

• Digitimes Research figures show branded tablet shipments based on tier-one brand, and white box tablet shipments based on what was the clone device industry. There is no overlap between these two sectors of the tablet industry, in order to avoid problems of duplicate figures.

• Tier-one firms include Apple, Google, Microsoft, Amazon, Barnes & Noble (B&N), Samsung, Asus, Acer, HP, Dell, Sony, HTC, RIM and others.

• White box tablets overwhelmingly use different AP solutions to branded devices in order to keep costs down. Many such solutions are sourced from China-affiliated suppliers, including Amlogic, Wonder Media and Telechip; the supply chain is therefore distinctly different from the branded tablet sector.tablet sector.

• Digitimes uses the term “white box” to denote companies that were previously largely clone device makers, which are mostly located in Shenzhen, as well as parts of the East China region. However, there is still a grey area between white box and branded tablets that is difficult to make completely clear.

• There is considerable variation in the level of recognition that different brands enjoy, from former white box firms like Lanmo, Gaofei and Ainuo, to channel company brands like Bestbuy’s Insignia brand, and tier 2 or tier 3 brands like HiSense, Haier, Philips, NEC and Toshiba. It is therefore difficult to draw a clear line between white box and branded products.

• White box and clone devices are different concepts to begin with, and there is a grey area between both concepts and the existence of a specific brand. However, shipments of models that fall into this difficult to calculate grey area remain small and within the extent of a reasonable margin of error.


Chap. 1Overview of branded tablets in 2012


Overview

• Digitimes Research projects that global branded tablet shipments will reach 104 million in 2012, representing 64% growth on 2011 figures.

• The iPad will account for roughly 63% of this figure, a drop of two percentage points on 2011, while shipment share for Android and Windows tablets will increase slightly.


Chap. 1.1


Global branded tablet shipments, 2011-2012

Unit: m units

-

38.9 80

100

120

iPad Non-iPad

+58.5%

+37.4%

10

41.0

65.0

22.3

38.9

0

20

40

60

80

2011 2012(e)


Global shipments of branded tablets are forecast to hit 104m units in 2012

• In 2012, Apple built on strong iPad 2 sales to effectively squeeze out other players during the first half of the year; and although other brands returned to growth in the third quarter and saw explosive growth in the fourth quarter, whole year growth rates for Apple tablets remain some 21 points higher than for other brands.


40

50

60

70

1

Unit: m units

Global tablet shipments by brand, 2011-2012

2011 ranking

Apple Amazon Samsung Google Asus Microsoft B&N Lenovo AcerOther tier 1

2011 41.0 3.5 4.6 0.0 1.5 0.0 2.9 1.1 1.9 6.8

2012(e) 65.0 10.8 7.4 4.9 2.7 2.5 2.5 2.1 1.5 4.5

0

10

20

30

23 4 57 8

2011 ranking


Google shoots into the top 4, Microsoft’s ambitions has potential for Surface

• While Apple remain secure in first place, the rankings for other brands will change significantly in 2012.

• Amazon is expected to overtake Samsung to take second place, while Samsung will fall back to third.

• If the Nexus 7 and Nexus 10 were included in Google’s shipment figures, Google would be the fourth ranked brand, overtaking all hardware brands except Samsung and Apple.

• Without the Nexus 7, Asus would be ranked fifth with 2.7 million units; including Nexus 7 shipments, Asus would be ranked fourth with 7.0 million.

• Microsoft’s target is to ship 3.0 million to 5.0 million units in the fourth quarter, depending on the level of shipments that the supply chain can support.level of shipments that the supply chain can support.

• B&N is forecast to ship just 2.5 million units, and no more than 3.0 million in the most optimistic scenario; its shipments will largely be determined by its ability to meet targets in the fourth quarter.

• Whole-year shipments for Asus, Microsoft and B&N will see little change under stable conditions; however, the latter two firms may overtake Asus if they meet their shipment targets.

• Lenovo will ship some 2.1 million units, almost double the level seen in 2011, although Google and Microsoft’s move into the market means that Lenovo’s ranking will remain unchanged.

• Acer’s whole-year shipments of just 1.45 million will see it fall to ninth place.

• In 2011, RIM was sixth, Motorola and HP tied in ninth place, and HTC was 11th; all have now dropped out of the top 10.


Taiwan-based ODM/EMS tablet shipments, 2011-2012

40

50

60

70 Unit: m units

Foxconn Quanta Pegatron Compal Wistron Inventec

2011 41.5 5.3 1.6 3.0 0.2 3.9

2012(e) 64.6 14.6 8.3 1.6 1.5 0.4

0

10

20

30

40


Major client orders are concentrated on the top 3 firms, which collectively account for 96% of Taiwan shipments

• The branded tablet market is becoming more concentrated in the hands of a small number of platform companies. Taiwan-based ODM/EMS firms will therefore only be able to maintain whole-year shipments in the one to two million unit range, unless they are able to win orders from these platform firms.

• The 9.7-inch iPad remains the mainstay of Foxconn’s tablet shipments, although it has also won a portion of iPad mini orders and is also making the Kindle Fire HD 8.9-inch for Amazon; this gives Foxconn shipments of 64.6 million, representing 56% growth on 2011.

• Quanta continues to hold on to orders for 7-inch Amazon devices and is also assembling the Nexus 7. Its success in maintaining concurrent relationships with two competing brands will allow in to achieve shipments of 14.6 million, representing 176% growth on 2011.

• Pegatron has also won some iPad Mini orders and is assembling the Surface for Microsoft, giving it whole-year shipments of 8.3 million and a formidable year-on-year growth rate of 407%.

• Compal and Inventec will both see shipments drop markedly on 2011 levels as a result of clients moving out of the market or switching to in-house production.

• Wistron’s shipments will see growth in 2012 as a result of it winning orders for the Asus Transformer TF300.


Chap. 1.2


42.2

60.3

█ 7.x” █ 8.x” █ 9.x” █ 10.x” █ >11”Unit: m units

67.8 58.1

11.4 13.7 0.1

60%

80%

100%0.4

Unit: %

Global shipments and shipment share for branded and white box tablets by size, 2011-2012

12.6

0.4

7.1

0.1

27.6

1.3

14.2

0.4

7.x" 8.x" 9.x" 10.x" >11"

Note: Figures on the left of each category in the bar chart are for 2011; figures on the right are for 2012 shipments.

20.2 26.6 0.6

1.3

67.8 58.1

2011 2012(e)

0%

20%

40%

60%


Large tablets remain dominant in 2012

• While Apple, Google and Amazon have all launched 7.x” models, shipments of these smaller sizes are concentrated in the second half of the year, particularly the fourth quarter. 9.x” models will therefore still account for the largest share of whole-year shipments at 58%.

• Nevertheless, shipments of 7.x” and 10.x” models are both growing much more rapidly that those of 9.x” models, with shipments of both categories set to more than double in 2012.


Global branded tablet shipments and shipment share by OS, 2011-2012

41.0

65.0

35.2

█ iOS █ Android █ Windows █ OtherUnit: m units Unit: %

30.3 33.9

0.5 3.6 4.4

60%

80%

100%

19.2

0.3 2.8

35.2

3.7 0.0

iOS Android Windows Other

Note: Figures on the left of each category in the bar chart are for 2011; figures on the right are for 2012 shipments.

64.8 62.6

2011 2012(e)

0%

20%

40%

60%


iOS still accounts for 63% of branded tablet shipments in 2012; but Windows grows

• Android and Windows’ share of shipments will grow in 2012, while iOS and other platforms will see their shares drop.

• iOS’ share of branded tablet shipments is expected to drop back to 54% in the fourth quarter of 2012 from a second-quarter high of 75%, as rival products were launched in the second half of 2012. iOS will nevertheless still account for 63% of whole-year shipments.

• Shipments of branded Android tablets are projected to hit 35.2 million, with Amazon and B&N’s modified Android platforms accounting for 13.3 million collectively, giving and B&N’s modified Android platforms accounting for 13.3 million collectively, giving shipments of 21.9 million for official Android tablets, of which the Nexus 7 and Nexus 10 will collectively account for 4.9 million.

• Shipments of Windows models will reach 3.7 million, of which the Surface will account for 2.5 million, with other hardware brands accounting for the remaining 1.2 million.

• RIM and HP sold tablets using their own BlackBerry Tablet OS (QNX) and WebOS platforms in 2011, but have already withdrawn from the market in 2012.

• RIM’s 2012 financial reports show that more than 1.0 million BlackBerry Playbook tablets were still shipped, but most of these were leftover stock from 2011.


40

50

60

70

Unit: m units

Global shipments of branded tablets by AP vendor, 2011-2012

Apple TI NVIDIA Samsung Qualcomm MediaTek Intel Other

2011 41.0 8.9 7.8 1.7 3.0 0.0 0.0 0.8

2012(e) 65.0 19.1 13.4 3.6 0.8 0.8 0.7 0.5

0

10

20

30

40


TI and Nvidia’s shipments hit 10m chips, MediaTek and Intel also move up the rankings

• Apple, TI and Nvidia were the top three application processor (AP) suppliers for branded tablets in 2012, with shipments for TI and Nvidia both surpassing the 10 million mark.

• Samsung’s AP chips are mainly shipped for use in its own device. The company will ship less than 4.0 million chips in 2012, making it the fourth largest tablet AP supplier.

• Qualcomm has suffered from capacity bottlenecks in the smartphone market, as well as the loss of two major clients as HP and HTC dropped out market, as well as the loss of two major clients as HP and HTC dropped out of the tablet market; its tablet AP shipments have therefore dropped to less than 1.00 million chips.

• MediaTek is the AP supplier for the Lenovo IdeaPad S2107, and its 2012 shipments will therefore stand at around 800,000 chips.

• Intel is supplying APs for Windows models made my PC manufacturers, giving it tablet AP shipments of around 700,000 chips.


Convertible tablet shipments, 2011-2012

620

2,000

2,500

3,000

3,500

Android Windowsk units

1,300

2,240

0

500

1,000

1,500

2011 2012(e)


Windows 8 drives the switch from notebooks to convertible tablets

• Digitimes Research classifies convertible models as tablets rather than notebooks; shipments of such models will reach 2.86 million in 2012, representing 120.2% growth on 2011.

• Shipments of Android models will reach 2.24 million, equivalent to 72.3% growth on 2011 levels.

• Shipments of Windows models will total 620,000, 21.7% will be convertible models. However, Windows’ share of shipments will eventually overtake models. However, Windows’ share of shipments will eventually overtake Android as PC manufacturers launch new products.


Chap. 2The rise and impact of white box tabletsThe rise and impact of white box tablets


Rise and impact of white box tablets

• The white box tablet sector has seen stunning growth in 2012, with whole-year shipments likely to exceed 50 million units, making the white box sector too big to ignore. Like the vast majority of research organizations, Digitimes Research previously only kept figures for branded tablet shipments, but has now become one of the first research firms in include figures on white box tablets in its calculations.

• White box tablets have seen such massive growth for three main reasons. First, • White box tablets have seen such massive growth for three main reasons. First, the growth of Android handsets has brought with it a huge potential customer base for tablets; second, China-based AP solutions have reached maturity; and third, whole-unit manufacturing costs for white box tablets continue to drop. Digitimes Research also discovered that the overall picture of the global tablet industry is markedly different when the white box sector is factored in, with Android already overtaking iOS as the number one platform in 2012 and seven-inch models becoming the mainstream specification.


Chap. 2.1Overview of white box tablets in 2012Overview of white box tablets in 2012


Quarterly shipments of white box tablets by processor, 2012

8

12

16

20

Unit: m units

1Q12 2Q12 3Q12(e) 4Q12(f)

Total 5.9 11.7 16.1 17.2

Other 0.5 0.7 1.1 2.0

InfoTM 0.6 0.8 1.0 1.1

Via 1.0 0.9 1.1 1.2

Amlogic 0.8 1.3 1.7 1.9

Rockchip 1.9 3.2 3.8 3.7

Allwinner 1.1 4.8 7.5 7.3

0

4


White box tablets shipments are forecast to hit 50.9m units in 2012

• Digitimes Research estimates whole-year white box tablet shipments for 2012 at 50.9 million units, representing fivefold growth on the previous year’s 10 million units.

• White box tablet shipment growth has been rapid throughout 2012, with shipments growing by four to five million units per quarter during the first three quarters.

• Some export orders were delivered ahead of schedule in September, with • Some export orders were delivered ahead of schedule in September, with the result that fourth quarter shipments show a slowdown in growth.

• Shipments are split roughly 35:65 between the first and second halves of the year, giving white box tablets a broadly similar seasonal distribution to other rapidly growing consumer electronics (CE) products such as branded tablets, or e-readers in 2011 and earlier.


60 80

100 120 140 160 180

Global shipments of branded and white box tablets, 2011-2012

Unit: m units

+59%

+74%+409%

+111%

2011 2012(e)

Apple 41.0 65.0

Other mainstream brands

22.3 38.9

White box 10.0 50.9

Total 73.3 154.8

0 20 40 60

+74%+409%


Global tablet shipments will top 155m in 2012, with white box tablet shipments second only to the iPad

• When white box tablets are factored in, whole-year global tablet shipments reached 73.3 million in 2011, and are projected to grow 111% to 155 million units in 2012.

• Shipments of white box tablets are likely to overtake shipments of non-mainstream brands, with grow rates far exceeding those of Apple and other mainstream brands.


Chap. 2.2Growth drivers for white box tabletsGrowth drivers for white box tablets


Comparison of shipments of white box tablets and other convertible/mobile devices

32.5

50.9

40

50

60

Unit: m units

Industry structure and players are similar to the

white box tablet sector

Low-end mobile computing devices

that enjoyed a sudden burst of

popularity Mobile reader devices with similar sizes and pricing

3032.5

22.8

0

10

20

30

White box MP3/MP4

Netbook(2009)

e-readers (2011) White box tablets (2012)

and pricing

Explosive growth surpasses that of comparable

devices


Growth for white box tablets shooting up past the 30m barrier

• The explosive growth of the white box sector in 2012 begs the question: is this growth sustainable, or will the market rapidly become mature?

• Historical examples, such as white box MP3/MP4 players, netbooks and e-readers, suggest that shipments tend to grow up to around 30 million units per year, before dropping back.

• According to processor suppliers for clone device makers, shipments of portable media players (PMP), commonly known as MP3 or MP4 players, from clone device makers peaked at around 30 million units per year.

• If only players from the white box PMP sector were involved, the market should theoretically have potential shipments of around 30 million.

Just as netbooks took a slice of the notebook market with low prices and stripped down • Just as netbooks took a slice of the notebook market with low prices and stripped down functionality, white box tablets could take a chunk of the tablet market. However, the netbook market failed to grow significantly after peaking at around 32.5 million units in 2009.

• E-readers are the most recent and most similar products to white box tablets in terms of size. They also saw rapid growth during the 2007-2011 period, but never managed to pass the 30 million milestone, and shipments are declining steeply to an estimated 10 million units in 2012.

• White box tablet shipments are expected to soar from just 10 million units in 2011 to some 50.9 million units in 2012. Other factors must therefore be at play for such massive growth to occur.


iPhone

iPad

iPhone

iPad

Smartphone Official Android tablets

Unit: m units

Handset and tablet shipment ratio for iOS and Android, 2011-2012

2011

2012(e)

30:70

33:67

If more Android handset users can be tempted to buy Android tablets, there will be a huge potential

0 100 200 300 400 500

Smartphone

Tablet

Smartphone

Tablet

iPhone2012(e)

2011

2012(e)

33:67

Note: Numbers in red indicate the ratio of smartphone and tablet shipments on the same platform for each year

8:92

8:92

will be a huge potential market as yet untapped by other brands, as there was for iOS


Growth driver 1: Untapped demand in the market, particularly the huge tablet demand from Android users

• The biggest driver in white box tablet growth comes from Android handset users, who create a huge demand for tablets as yet unmet by brand vendors. Digitimes Research estimates that global shipments of Android smartphones will hit 430 million units in 2012, representing an increase of 200 million on the figure for 2011, and providing an enormous potential customer base for Android tablets.

• Android users cover every sector from the high end to the low end, and are distributed across both developed and emerging markets; moreover, brand tablet vendors have yet to meet demand from these potential Android tablet markets.

• The ratio of branded tablet shipments to smartphone shipments will be 3:7 for iOS in 2012, roughly on a par with 2011, and 8:92 for Android. If more Android handset users could be tempted to buy Android tablets, i.e. the tablet:handset shipment ratio could be increased, the potential market for Android tablets would be far larger than current shipments of branded Android tablets.tablets would be far larger than current shipments of branded Android tablets.

• Digitimes Research believes that branded tablets currently account for such a low proportion of overall Android device shipments for two reasons:

• First, Android has always been more fragmented than iOS, making Android handset users less inclined to buy tablets than iPhone users.

• Second, Android handsets are already available for less than US$100, while the cheapest Android branded tablets still cost US$159 and US$199; some potential low-end tablet buyers are therefore not yet catered for by brand vendors.

• Google has launched Android 4.0, known as Ice Cream Sandwich or ICS for short, to reduce fragmentation. Virtually all white box tablet AP vendors supported ICS in 2012.

• Falling hardware costs mean that white box tablets can now be bought for as little as US$79, so white box vendors can more directly target the low-end sector that accounts for such a large proportion of the Android user base.


Comparison of CPUs for mainstream white box and branded tablets

RK2918 RK3066 A13 A10 Tegra 2 Tegra 3

Process 55nm 40nm 55nm 55nm 40nm 40nm

Core(s) Cortex-A8single core

Cortex-A9dual core

Cortex-A8single core

Cortex-A8single core

Cortex-A9dual core

Cortex-A9quad core

Clock speed 1.2GHz 1.6GHz 1GHz 1.5GHz 1GHz 1.5GHz

Video recorder

1080p@30fps

1080p@30fps

1080p@30fps

1080p@60fps

1080p@30fps

1080p@30fpsrecorder

encoding@30fps @30fps @30fps @60fps @30fps @30fps

Video playback decoding

1080p@30fps

1080p@60fps

1080p@30fps

1080p@60fps

1080p@30fps

1080p@30fps

GPUGC300 Mali400 Mali400 Mali400

GeForce400MHz

GeForce520MHz

Resolution support

1024x768 1920x1080 800x600 1920x1080 1680x1050 1920x1080

2H12 list price

US$8 US$12 US$5 US$8 US$15 US$20


Growth driver 2: Improved CPU performancehelps China-based firms’ catch up with tier 1 vendors

• The second contributing factor to the rise of white box tablets is the improvement in the performance of APs from China-based suppliers, which allows even low-end products to deliver acceptable levels of performance.

• Among the more popular AP solutions for white box tablets in 2012 are the entry level Allwinner A13 and Rockchip RK2918, and the higher end Allwinner A10 and Rockchip RK3066.

• White box tablet APs often compromise on some aspects of performance in order to keep costs down, but are capable of matching solutions used in order to keep costs down, but are capable of matching solutions used in branded tablet, such as the Tegra 2 or Tegra 3, in some areas.

• Branded tablet AP solutions generally have better CPU performance. A list of commonly used solutions in order of CPU performance would read: Tegra 3, TK3066, Tegra 2, A10, A13 and RK2918.

• However, The A10 actually has exceptional multimedia performance, although the Tegra 3, RK3066 and Tegra 2 are not far behind.


Factory gate price of entry level 7-inch white box tablet

50+

45-50

40-45 <40

Unit: US$

1Q12 2Q12 3Q12 4Q12(e)


Growth driver 3: Cost -Factory gate prices for cheapest models falls to US$40

• The third reason for the rapid growth of white box tablets is the rapid drop in costs.

• When Amazon launched the Kindle Fire at US$199 in late 2011, many in the industry voiced concerns that the white box tablet market would suffer as a result of price pressures from branded products. However, the reality has been that white box tablets have been virtually unaffected by the Kindle Fire.

According to white box vendors, the factory gate price of an entry level • According to white box vendors, the factory gate price of an entry level white box tablet has fallen from US$50 in the first quarter of 2012 to just US$40 by the fall, with retail prices dropping as low as US$79.

• By fall 2012, the cheapest branded tablets, such as the revised first-generation Kindle Fire, were on sale for US$159, while the cheapest Nexus 7 model was available for US$199, in both cases more than double the price of entry-level white box tablets.

• This marked price difference enabled white box tablets to maintain very high growth despite the threat from branded devices, with the situation in some ways resembling the e-reader market in 2010 and 2011.


US$40 white box tablet design solutions:Low-end CPU, TN panel, G+P touch sensor

Touch panel total: US$15.6-18• 7” TV panel (800x480): US$9.6-10• Supplier: BOE, Tianma, HannStar• Touch sensors (G+P or GG):

US$6-8• Suppliers: BYD, Truly

PCB total: US$14.4-19.2• Processor：US$5-12

• Suppliers: Allwinner, Amlogic, Via, InfoTM• Memory: (4GB-8GB) US$1.8-3• Suppliers: Micron, SK Hynix• Power management IC: US$0.8-1• Suppliers: TI, Wolfson, Realtek• Other components on the PCB: US$7-9

Total other costs: US$4-6• Casing: US$0.9-1.3• Battery (2600mAh): US$3-4


US$40 white box tablet design solutions:Low-end CPU, TN panel, G+P touch sensor

• Sources at Taiwan-based ODM/EMS firms indicate that factory gate prices for seven-inch branded tablets remained at US120-130, well above the US$80-90 for white box tablets.

• White box makers must choose different solutions from brand vendors to keep costs down.

• Brand vendors mostly use wide viewing angle display technologies such as IPS, FFS or MVA; while white box makers generally opt for TN panels, as well as imposing less stringent quality requirements, for example by accepting B-stock components that would not be acceptable to brand vendors.

• By fall 2012, seven-inch panels with a resolution of 800x480 cost just CNY60-62 (US$9.60-10.00).

• G+P touch sensor solutions are used on low-end models to reduce costs. Such solutions involve bonding a single sheet of plastic on a single sheet of glass, and generally cost US$6-8 per unit.

• The PCB is another major contributor to costs, at CNY90-120 (US$14.40-19.20) depending on the supplier.

• The application processor (AP) is the most expensive component on the PCB. Mainstream solutions such as the Allwinner A10 and A13, or the Rockchip RK2918 and RK3066, are listed at US$5-12.

• Nvidia and TI APs generally have a list price of US$15-20.

• Stiff competition and transparent pricing in the memory sector means that the difference in prices between suppliers is minimal, with 4GB costing around US$1.80 and 8GB around US$3.

• White box vendors can also economize on sensors, for example by using only linear accelerometers (G sensors) and no gyroscopes; further savings can be achieved by including only a front-facing camera, i.e. omitting the rear camera.

• Adding the costs outlined above to the battery and the device casing gives a whole-unit shipment cost of around US$40 for a white box tablet, and as low as US$35-40 for some manufacturers.


Chap. 2.3White box firms drive a transformation of the

entire tablet industryentire tablet industry


Global branded and “brand + white box” tablet shipments and shipment share by OS, 2012

65.0

86.1

Unit: m units Unit: %

33.9 55.6

3.6 2.4

60%

80%

100%

iOS WindowsAndroid

35.2

3.7

iOS Android Windows

Note: In the bar chart, figures on the left denote brand shipments, figures on the right denote “brand + white box” shipments

62.6

42.0

Brand Brand + white box

0%

20%

40%


Factoring in white box tablets, Android already surpassed iOS as the largest tablet platform in 2012

• The majority of research bodies do not officially include white box tablets in their industry data, but Digitimes Research believes that white box tablets are already too important to ignore in 2012, and are in fact leading a transformation in the way both industry players and observers view the tablet market as a whole.

• Digitimes Research estimates that Android will account for 33.9% of branded tablet shipments in 2012, equivalent to 35.2 million units.

• iOS will still have a shipment share of 62.6%, representing a drop of just two percentage points on 2011, although other mainstream brands saw collective growth of 118% in the fourth quarter of 2012, turning the tide on Apple’s dominance.

Factoring in the white box sector, Android overtook iOS as the largest tablet platform in 2012 with a total • Factoring in the white box sector, Android overtook iOS as the largest tablet platform in 2012 with a total of 55.6% of tablets shipments.

• When white box and branded tablet shipments are factored in, iOS’ shipment share falls to 42%, 21 percentage points lower than its share of branded tablet shipments.

• Digitimes Research estimates that if Android can close the gap with iOS in terms of the ratio of tablet to handset shipments, to a ratio of 2:8 (the figure for iOS is 2:7), the 2012 Android tablet market would already exceed 100 million units.

• Android tablet shipments including white box and branded models will soar to a total of 86.1 million for 2012, giving a tablet to handset shipment ratio of 17:83.

• Digitimes Research believes that white box tablets are currently replacing branded Android tablets at the low end and in markets where brand vendors are relatively weak such as emerging countries, cannibalizing some of the potential market for Android tablets.


Shipment share of Android tablets, by category 2011-2012

Amazon and B&N

Official Android

White box

44%34%

25%

2011 201244%

22%

16%59%

2011Android

tablet shipments reached 29.2m

units

2012Android

tablet shipments will reach 86.1m

units


White box products account for 59% of Android tablet shipments

• Including the white box sector changes not only the picture for Android tablet shipments and shipment share, but indeed the distribution of power in the Android tablet sector as a whole.

• Explosive growth in white box tablets means that official Android tablet vendors like Samsung, Asus and Lenovo will only account for some 25% Android tablets in 2012, a 19 percentage point drop on 2011.

• E-book vendors like Amazon and B&N are also suffering as a result of the • E-book vendors like Amazon and B&N are also suffering as a result of the rise of white box tablets, with their share of Android tablet shipments falling from 22% in 2011 to 16% in 2012.

• It is this situation that will spur Google to launch a US$99 tablet in 2013 to fight back against white box tablets, after staging a comeback against Amazon with the Nexus 7 in 2012.


White box tablet shipments by size, 2012

3%5%

10%

10.x" 9.x" 8.x" 7.x"

82%


White box tablet shipments are concentrated on 7-inch devices, with 8-inch devices also accounting for 10%

• White box tablets are focused on the low end sector, which is reflected in the fact that 7.x” models account for 82% of white box tablets.

• 8.0” tablets with a 4:3 aspect ratio are unique to the white box sector and account for some 10% of white box tablets.

• 9” or larger displays involve higher panel and touch module costs, but white box solution design firms also always raise the specification and cost of other components in parallel to screen size, driving up overall unit costs and other components in parallel to screen size, driving up overall unit costs and prices; as a result this size category accounts for less than 10% of white box tablets.


60.3

69.3 62.8

Unit: m units

4.1

58.1

40.6

13.7 10.2 0.4

60%

80%

100% 0.3

Unit: %7.x” >11”

8.x” 9.x” 10.x”

Global shipments and shipment share for branded and “brand + white box” tablets by size, 2012

27.6

1.3

14.2

0.4 6.4

15.8

0.4

7.x" 8.x" 9.x" 10.x" >11"

26.6 44.8

1.3

4.1

Brand Brand and White box

0%

20%

40%

Note: In the bar chart, figures on the left denote brand shipments, figures on the right denote “brand + white box” shipments


• The mainstream size for branded tablets has tipped from 9.x” in favor of 7.x” models in 2012 with the launch of the Kindle Fire, Nexus 7 and iPad mini.

• If the white box sector is included, 7.x” is already the category with the greatest shipments in 2012.

• Price and portability are increasingly the dominant factors in both the branded and white box sectors of the tablet market, with the result that

Tablet shipments show that 7-inch models are likely to overtake 9.x-inch as the mainstream size in 2012

branded and white box sectors of the tablet market, with the result that tablets will be in ever closer competition with smartphones in the future.


Share of global tablet shipments, 2012

Apple Samsung White boxAmazon Microsoft + B&N

Google Other tier 1 brands

4%

8%

10%

43%32%

Total of Total of

63%10%

5%

4%

7%3%3%

5%

7%

Total of 104m units excluding white box

Total of 155m units including white box


White box account for nearly one third of shipments, tier-one brands excluding Apple account for 25%

• The four major platform firms – Apple, Google, Amazon and Microsoft (chiefly because its investment in Nook Media adds B&N shipments to its own totals) - will collectively account for 82% of the branded tablet market in 2012.

• When white box tablets are factored in, hardware brand vendors’ addressable market accounts for an even smaller share of the overall tablet market at just 12%.

• Even major brands like Apple, Microsoft and Amazon are struggling to check the rise of white box tablets, with shipments already second only to those of Apple.

• Apple is focused on models with high margins and is unlikely to go head on against white box vendors.vendors.

• The primary appeal of Microsoft’s Surface is its PC-like document creation features, and it is unlikely to move into the low-price or small-size sectors, not least because it must also maintain the profitability of Windows and Office.

• Even if Microsoft actually launches the rumoured Xbox Surface games tablet, its performance, positioning and price would all be a far cry from those of white box tablets.

• Amazon is focused on low-priced products, but is limited to the European and North American markets due to the limitations of its channel, content and app ecosystems; it will therefore have only a minimal direct impact on white box tablets.

• Of the four major platform firms, Google poses the biggest potential threat to the future of the white box sector.


Chap. 2.4New forces in the industry created by the rise

of white box tabletsof white box tablets


40

50

60

70

Unit: m units

Global shipments of tablet APs, 2012

White box tablet AP vendors

Branded tablet AP vendors

AppleAllwinne

rTI NV Rockchip Amlogic Via InfoTM

Samsung

Qualcomm

MediaTek

Intel Other

2012(e) 65.0 20.8 19.1 13.4 12.6 5.7 4.1 3.7 3.6 0.8 0.8 0.7 4.4

0

10

20

30


White box solution vendors account for 2 of the top 5 global tablet processor firms

• The rise of white box tablets has turned the relevant China-based companies into new forces in the market, the most important of which are processor (AP) and solution design vendors (design houses).

• Digitimes Research’s calculations of branded and white box tablets by AP vendor reveal that Allwinner and Rockchip will both move into the top five, with Allwinner in particular already close to one third of Apple’s shipments.

• These calculations are for the shipments of tablets made using different brands of AP, rather than actual AP shipments.

• For tier-one AP vendors like TI, Nvidia, Samsung and Qualcomm, white box tablet AP vendors are a very damaging force at the low end of the market.damaging force at the low end of the market.

• In the past, netbooks failed to make further inroads in terms of replacing conventional notebooks once netbook shipments reached 32.5 million, partly because Intel was unwilling to allow its own low-end products to erode the market for its midrange and high-end products.

• However, as white box AP vendors continue to improve the performance of their tablet chips, they will catch up with and threaten the position of tier-one AP vendors.

• Google and Amazon will continue to fight on price, while hardware brand vendors will become more willing to consider using cheaper AP solutions.

• Lenovo’s key S2107 tablet launched in the second half of 2012 already uses a MediaTek solution, while Asus has previously researched the use of Via solutions; tier-one brands are therefore likely to make increasing use of the types of AP solution that are currently favoured by white box tablet vendors, at least in low-end models.


40

50

60

Unit: m units

Tablet shipments for global brands and China-based solution vendors, 2012

Solution vendors mainly using Allwinner chips

Brands

Solutions vendor mainly using Rockchip chips

AppleAmazo

nSamsu

ngGoogle

Pingwang

Asus TianqiMicroso

ftB&N

Topwise

Sochip LenovoHetianchuang

UVChip AcerChih Tien

e-Shine Other

2012(e) 65.0 10.8 7.2 4.9 3.2 2.7 2.6 2.5 2.5 2.4 2.3 2.1 2.1 2.0 1.5 1.4 1.3 36.0

0

10

20

30

Source: Digitimes Research , November 2012

16

Rockchip chips


Numerous white box tablet makers collectively constitute a major force, while shipments for major solution

vendors may surpass tier 1 brands

• Some solution design firms (design houses) closely resemble ODMs, but are more flexible and able to directly ship PCBs to downstream assembly firms, as well as shipping whole units to brand vendors or channel companies that wish to affix their own brand; some also have experience of running their own brands.

• While solution vendors and brand companies have significantly different implications for downstream sectors of the industrial chain, given that their implications for downstream sectors of the industrial chain, given that their shipments reflect their individual impact on upstream procurement for items such as memory or Wi-Fi modules, it is still possible to compare the differences in the size of shipments.

• Digitimes Research calculates that the major white box tablet solution vendors such as Pingwang, Tianqi, Hetianchuang, UVChip, Sochip and e-Shine will soon be on a broadly similar level to those of tier-one brand vendors.

• Pingwang’s shipments may even exceed those of all tier-one hardware brand vendors except Samsung.


40

50

60

70

Unit: m units

Tablet shipments for Taiwan-based ODM/EMS firms and China-based solution vendors, 2012

Solution vendors mainly using Allwinner chips

Taiwan ODM/EMS

Solution vendors mainly using

Foxconn

QuantaPegatro

nPingwa

ngTianqi Topwise Sochip

Hetianchuang

Uvchip Compal WistronChih Tien

e-ShineInvente

c

2012(e) 64.6 14.6 8.3 3.2 2.6 2.4 2.3 2.1 2.0 1.6 1.5 1.4 1.3 0.4

0

10

20

30

Solution vendors mainly using Rockchip chips


Factoring in whole-unit and design solutions, only the top 3 Taiwan-based ODM/EMS firms have greater

shipments than solution vendors• If China-based solution vendors are compared with Taiwan-based ODM/EMS

firms in the same way, we find that only Foxconn, Quanta and Pegatron have greater shipments than the major China-based white box tablet solution vendors.

• As cost pressures on brand companies increase, brands may be more willing to use white box AP solutions, with the result that China-based solution vendors are likely to take a significant number of brand clients away from vendors are likely to take a significant number of brand clients away from Taiwan-based ODM/EMS firms.


Chap. 3Trends for the major global tablet vendorsTrends for the major global tablet vendors


Overview

• The big four platform companies will continue to dominate the global tablet

industry in 2013, as the war between the various platforms heats up further.

The differences in business model between Apple, Google, Amazon and

Microsoft will be of decisive importance in determining their relative strengths

and weaknesses in this battle.

• The latest products announced by the big four during September and October

2012 show that Apple is unwilling to reduce its margins by giving the iPad 2012 show that Apple is unwilling to reduce its margins by giving the iPad

mini a lower price, giving competitors an opportunity to exploit. Google is

pricing its products aggressively and has the least vulnerable business model.

Microsoft’s business model and the positioning of the Surface product itself

will constrain it primarily to the midrange/high-end and large-size sectors;

moreover, the existence of Google will force it to follow a similar route of

close hardware/software integration to that of Apple. Amazon’s margins are

likely to be squeezed even further as the price war with Google intensifies.


Chap. 3.1Platform war in the tablet industryPlatform war in the tablet industry


Four key aspects of the platform war:Platform size, ecosystem, cohesion, profitability

Product services (revenue sources):1. End hardware

Ecosystem members:1. OEM partners2. Software & app

developers3. Digital content

firms4. Advertising

agencies5. Sellers

Expanding platform size Attracting

ecosystem members

1 ２

1. End hardware2. OS3. Software & apps4. Digital content5. Cloud services6. Advertising7. Online and mobile

payments

Creating cohesion

Making profit

Form of cohesion1. User interface2. Popular

software/apps3. Digital content4. Cloud storage,

synchronization5. Other…

３４


Four key aspects of the platform war:Platform size, ecosystem, cohesion,

profitability

• The tablet industry will see an intensifying platform war between Apple,

Google, Amazon and Microsoft in 2013.

• The real battleground will be over the ability to use various kinds of free, or

at least cheap, products and services to tempt users to buy in, and thereby to

build ecosystems, increase cohesion and find ways to deliver channel profits.build ecosystems, increase cohesion and find ways to deliver channel profits.

• To put it simply, the differences in strategy between Apple, Google and

Amazon stem from their choices in terms of retaining or abandoning various

sources of revenue, including hardware, OS, software and apps, digital

content, cloud services, and advertising.


Four major mobile device platform firms’ presence

3

4

5

6

7

Apple

Google

Importa

nce

of p

rofita

bility

0

1

2 Google

Amazon

Microsoft

Importa

nce

of p

rofita

bility

Business territory (revenue source)


The four main tablet platform firms are disrupting each others’ efforts

• The battle between the platform companies essentially involves doing everything

possible to expand market share, keep up margins in each company’s original area of

business, and damage competitors’ profitability in their main area of business.

• Apple and Microsoft rely on both hardware and software for profits, making them

easier targets.

• Despite Amazon’s status as the undisputed king of the online retail sector, its activities • Despite Amazon’s status as the undisputed king of the online retail sector, its activities

in the mobile market are still at an early stage of development and it relies on the

Kindle Fire as its hardware platform; the profitability of its mobile business as a whole

is therefore vulnerable to changes in mobile device margin rates.

• Apple, Microsoft and Amazon have consistently failed to make major breakthroughs in

the mobile advertising sector, giving Google a unchallenged position in this area, and

as a result, the most robust business model.


The 4 main platform firms each face different growth obstacles and bottom lines

Growth obstacles:

• High prices• Brand vendors’

competitiveness• Ecosystem still weak• Brand vendors’ support

• Ecosystem still weak• Limited to the North

American and European markets

Bottom lines:

• 30% margins

• No foundation in the tablet market

• Margins for the surface are lower than Windows licensing costs

• Overall profits for the Kindle


The 4 main platform firms each face different growth obstacles and bottom lines

• The starting point of each platform company’s business model makes it easy to

see where the major obstacles to growth and the bottom line for each firm are.

• One key aspect of competition for each of the big four is to eliminate its own

growth obstacles; by increasing market share, each can hope to force the

competition closer to their bottom line, reducing their willingness to remain in

the market.the market.

• Current trends show that Google has the greatest chance of pushing Apple,

Microsoft and Amazon down to their bottom line.

• While Google has launched its own Nexus range of tablets, its share of Android

devices as a whole is very low; even if it were to step up the price war by

selling hardware at a loss, the impact on the profitability of its Android

business as a whole would still be minimal, putting in the most unassailable

position of the four platform companies.


Chap. 3.2AppleApple


Apple product roadmap acceleration, 2013

2010 2011 2012 2013

Device launch

5th iPad,

6th iPad?

OS launch

AP launch A7, A7XA8…?


With 2 new iPad models and 3 new processors launched in one year, does Apple intend to increase

the pace of product updates

• Apple launched two new iPad models in 2012, with the fourth generation

iPad and the iPad mini both launched in the second half of the year. As a

result, many media observers now expect Apple to launch more than one

new iPad in 2013, or even to move towards offering a new strategy with a

wider range of models on sale at any one time.


Apple processor development

Name A4 A4 A5 A5 A5 A5X A6 A6X

Model no. APL0398 APL0398 APL0498 APL0498 APL2498 APL5498 APL0598 NA

Product iPad iPhone 4 iPad 2 iPhone 4S iPad 2(US$399)

New iPad iPhone 5 4th iPad

Device resolution

1024x768 960x640 1024x768 960x640 1024x768 2048x1536 1136x640 2048x1536

Launch date Mar’10 Jun’10 Mar’11 Oct’11 Mar’12 Mar’12 Sep’12 Oct’12

Core(s) Cortex-A8 Cortex-A8 Cortex-A9 Cortex-A9 Cortex-A9 Cortex-A9 Cortex-A15 Cortex-A15

Clock speed 1GHz 800MHz 1GHz 800MHz 1GHz 1GHz 1.3GHz 1.5GHz

Process 45nm 45nm 45nm 45nm 32nm 45nm 32nm 32nm

Area (mm2) 53.3 53.3 122.2 122.2 69.6 165 96.7 110-115

GPU PVR SGX535200MHz

PVR SGX535200MHz

PVR SGX543M

P2200MHz

PVR SGX543MP

2200MHz

PVR SGX543MP

2200MHz

PVR SGX543MP4

200MHz

PVR SGX543MP3

266MHz

PVR SGX543MP4

500MHz

Memory Dual-channel200MHz LPDDR3.2GB/s

Dual-channel200MHz LPDDR3.2GB/s

Dual-channel400MHxLPDDR26.4GB/s



4 channel400MHzLPDDR212.8GB/s

Dual-channel533MHzLPDDR2

>12.8GB/s

4 channel533MHzLPDDR2-17GB/s

１１１１ 2


Apple has yet to increase the pace of processor updates, and is expected to launch the A7 rather

than the A8 in 2013

• Apple has in the past launched updated processors at the same time as new products.

This means that the pace at which the company updates its processors can be used to

infer its roadmap for new product launches.

• Digitimes Research believes that even though Apple has launched three new

processors in 2012 – the A5X, A6 and A6 – the A5X and A6X only consist of minor

revisions to the A5 and A6 respectively.revisions to the A5 and A6 respectively.

• Processor updates depend on changes to the core architecture, and rather than

speeding up the pace of core architecture changes from the A5 to the A6, Apple has

in fact slowed down.

• The company is therefore projected to launch only A7 and A7X models in 2013, with

the A8 unlikely to appear before the end of 2013. For the same reason, Apple is

unlikely to launch new iPad models at different price points in the same year; in other

words, it will not launch both fifth and sixth generation iPads, or both second and

third generation iPad mini models, in 2013.


Apple may launch a 4th iPad line in 2013

2011 2012 2013

AP launch A7 A7X

US$229 iPad miniUS$229

US$329

US$399

US$499

iPad launch

iPad mini

iPad 2

iPad 2 New iPad 4th iPad 5th iPad

4th iPad

Retina mini

iPad mini

1

2


Apple may launch a 4th iPad line in 2013

• However, Apple may continue the strategy first seen with the iPad 2

by continuing to sell the fourth generation iPad line at a price of

US$399 while launching a fifth generation iPad.

• Apple may also keep the first generation iPad mini on sale at a

reduced price when it launches the second generation iPad mini.reduced price when it launches the second generation iPad mini.

• Digitimes Research believes that Apple is highly likely to use “Retina”

displays in the second generation iPad mini, in which case the price of

the first generation iPad mini would likely be reduced to US$229.


iPhone sales and growth estimates, 4Q10-4Q12

20

30

40

50

Unit: m units

0

10

4Q10 2Q11 4Q11 2Q12 4Q12(f)

24.0 40.526.037.0 35.117.118.6 20.316.2

-8% 69%26%117% -5%16%15% 9%15%

Sales

Q/Q

Y/Y 41% 9%28%128% 88%21%113% 142%86%


Seasonal variations in iPad sales during 2013 are likely to resemble patterns in iPhone sales during 2012

• Apple’s decision to launch a new iPad model in October 2012 changes the

seasonal pattern originally expected for iPad launches in 2013.

• When Apple moved the iPhone launch date from June to October in 2011, it

effectively adjusted the seasonal distribution of iPhone sales such that fourth-

quarter sales were the highest, with sales subsequently dropping off with each

successive quarter of the new year.successive quarter of the new year.

• If the next iPad is indeed launched in October 2013, the seasonal distribution

of iPad sales is likely to resemble the pattern for iPhone sales in 2012.

• If Apple launches the next generation iPad in June or July of 2013, the

seasonal contraction in the first quarter will increase, while sales in the third

and fourth quarter will remain flat, giving whole-year sales a seasonal

distribution that more closely resembles that of the iPod.


iPad sales and growth rate estimates, 4Q10-4Q12

10

15

20

25

30Unit: m units

0

5

4Q11 2Q12 4Q12(f) 2Q13(f) 4Q13(f)

Sales

Q/Q

Y/Y

14.0 25.015.020.0 18.014.011.8 17.015.4

-7% 79%-17%43% -10%-18%-24% 44%39%

-2% 25%-12%30% 53%26%152% 84%111%


Sales of the whole iPad range are forecast to hit 75m units in 2013, with shipments reaching 80m

• Digitimes Research projects that total sales of all iPad models will hit

75 million in 2013 if the new model is launched in October, equivalent

to 19% growth on the 2012 forecast of 63 million, while shipments

will hit 80 million.

• If demand is stronger than expected and continues until the first • If demand is stronger than expected and continues until the first

quarter of 2013, whole-year sales of the entire iPad range may bit 80-

85 million units in 2013, with shipments going as high as 90 million.


iPad quarterly shipments, 2012

610

20

25

iPad 2 New iPad

Unit: m units

iPad mini’s share of

75 4 4 4

6 10 11

2

10

8

10

0

5

10

15

1Q12 2Q12 3Q12(e) 4Q12(f) 1Q13(f)

share of shipments increases


iPad mini shipments could reach 40m in 2013

• Information obtained by Digitimes Research suggests that the iPad

mini will account for an increasing share of all iPad shipments with

each passing quarter, and will already account for nearly half of all

iPad shipments in the first quarter of 2013.

If iPad shipments reach 80 million units in 2013, iPad mini shipments • If iPad shipments reach 80 million units in 2013, iPad mini shipments

will be around 40 million units.


Chap. 3.3GoogleGoogle


Monthly shipment estimates for the Nexus 7, 2H12

600

800

1,000

July estimatesk units

Shipment figures revised upwards

0

200

400

600

Jul'12 Aug'12 Sep'12 Oct'12(e) Nov'12(e) Dec'12(f)


Market response to the Nexus 7 is better than expected, 2012 shipments expected to top 4.3m

• Following the lacklustre market performance of Android tablets in 2011, Google decided to

launch the Nexus 7 in conjunction with Asus.

• Unlike earlier Nexus-branded handsets, Google positioned the new tablet with a breakthrough

price and was more aggressive about increasing shipments.

• Digitimes Research originally projected that Nexus 7 shipments would begin to tail off in the

fourth quarter of 2012, but, aided by delays to the commencement of iPad mini shipments,

Nexus 7 shipments actually grew in the fourth quarter, while whole-year shipments are likely Nexus 7 shipments actually grew in the fourth quarter, while whole-year shipments are likely

to hit 4.3 million units.


4th iPad9.7”

Galaxy Tab 2 10.110.1”

Success of the Nexus 7 drives Google to launch the Nexus 10

9.7”2048x1536From US$499

Nexus 1010.1”2560x1600From US$399

10.1”1280x800US$399�US$349

iPad 29.7”1024x768US$399

• New display panels and processors

• As Apple reduces its use of Samsung components, the Nexus 10 becomes an important new shipment outlet for Samsung’s high-resolution panels

Threatens the iPad


Success of the Nexus 7 drives Google to launch the Nexus 10

• Spurred on by the success of its strategy for the Nexus 7, Google has set its sights on Apple and

launched the high-value, high-performance Nexus 10 tablet to challenge the iPad, hitting not just the

position of the fourth generation iPad, but also the US$399 iPad 2.

• Apple’s ability to maintain its US$399 9.7-inch product line is now threatened by the launch of the

Nexus 10, as well as by cannibalization of sales by the iPad mini.

• iSuppli estimates that the increased display resolution on the new iPad results in an increase of around

US$30 in display panel costs compared to the iPad 2. Digitimes Research believes that the different in

display panels costs between the Nexus 10 and the Samsung Galaxy Tab 2 10.1 is also in the same display panels costs between the Nexus 10 and the Samsung Galaxy Tab 2 10.1 is also in the same

range.

• However, as Samsung uses its own in-house display panels, the knock-on effect on final device prices

can be kept to a minimum, with the result that the price difference between the Google Nexus 10 and

the Samsung Galaxy Tab 2 10.1 is just US$50.

• Just as Apple is striving to eliminate Samsung from its supply chain, Samsung is collaborating with

Google on the Nexus 10, making Samsung more competitive with Apple in terms of final devices, as

well as providing it with a new outlet for its high-resolution display panels.

• The aggressive pricing of the Nexus 10 makes it even more likely that Google will launch a low-price

seven-inch tablet in summer 2013, while supply chain rumours make it likely that the device will be

priced at just US$99.


3%

12%9%

Global tablet share and Google’s strategic targets, 2012

■ Google ■ Other tier 1 brands ■ Amazon+B&N ■ Apple ■ White box □ Microsoft

Primary targets:Amazon+B&N1. Limited resources2. Closest to

withdrawing from the market

Tertiary target:

1

3

32%

1%

43%Secondary target:Apple1. Major enemy

brand2. Can more easily

use low-priced products to attack

Tertiary target:White box tablets1. Affect sales of

official Android tablets

2. Precise targets of attack less clear

2


Google will take on Apple, Amazon, B&N and white box tablet vendors in 2013

• Looking at the performance of Android tablets as a whole during 2012, the Nexus 7 has seen

considerable success, but competing products from Apple, Amazon, B&N and the white box vendors

still account for a very large share of the market.

• Digitimes Research believes that Google will launch an all-out effort to take on all these competitors

in 2013.

• Amazon and B&N have both experienced a major deterioration in their financial situation following

their entry into the tablet market. Should the losses from their tablet businesses rise to the point that

they can no longer be offset by their content businesses, they will be forced to exit the tablet market they can no longer be offset by their content businesses, they will be forced to exit the tablet market

and abandon their modified Android platforms in favor of a cross-platform digital content strategy.

• Google’s number one priority is to force Amazon and B&N out of the market, and as both are already

not far from their bottom line, they are vulnerable to attack.

• Apple’s high price positioning also makes it vulnerable to products like the Nexus 10. Apple is also the

biggest competitor for Google’s hardware partners, making it Google’s second most important target.

• White box tablets affect sales of official Android products and must also be stopped from Google’s

point of view; however, the lack of a clear, single target means that this threat is a lower priority for

Google that those mentioned above.

• Microsoft’s lack of support from OEM partners means that it is the least significant competitor for

Google.


Specs Partners

• 10.1”• 2560x1600• Exynos chip

Samsung

Price

US$399

• 7”1920x1200

Unclear.

Shipment forecast

2-4m

Google will expand the Nexus tablet range

• 7”• 10240x600• Likely to use tier

2 AP• Components

from firms based in China of Taiwan

Unclear. Samsung Asus and Lenovo are

all potential partners

US$99-129

• 1920x1200• Thinner and

lighter, or featuring higher resolutions

Unclear. Samsung Asus and Lenovo are

all potential partners

US$199-249

8-12m

5-8mNexus 72nd generation

Nexus 7Budget version


Google will expand the Nexus tablet range, total shipments have the potential to reach 19m units in 2013

• Given this strategy of attack on all fronts, Google is expected to further expand the

Nexus tablet range in 2013, adding an even cheaper seven-inch model to the range, as

well as producing second generation Nexus 10 and Nexus 7 models.

• Digitimes Research projects that Google’s whole-year shipments of the entire Nexus

range in 2013 will be in the 15-24 million-unit range; given steady, health growth,

shipments would be around 19 million units.

Shipments of individual mainstream 10-inch Android tablet models priced from US$399 • Shipments of individual mainstream 10-inch Android tablet models priced from US$399

were of the order of 150,000 per month in 2012.

• Google shipped around 4.3 million Nexus 7 tablets in the second half of 2012, and could

see growth of 25-100% for a second generation model in the same price bracket.

Shipments of the rumoured ultra-budget model could reach two to three times the level

of the Nexus 7, giving shipments of 1.3-2.0 million.


Share of Android tablet shipments for Google and other official Android tablet vendors, 2012

20%

50%

Google Other official Android tablets

Official Android Official Android

80%

50%

50%Official Android tablet shipments of 21.9m units in

2012

Official Android tablet shipments of 37.7m units in

2013


Ability to compete on level playing field with Google is key to success for hardware brands other than Apple

• Digitimes Research projects that the Nexus 7 will account for 20% of all official Android

tablets in 2012.

• Bolstered by the Nexus 7, Asus’ will ship a total of 7.0 million tablets in 2012, putting it

nearly 5.0 million units ahead of Lenovo.

• In effect, Google is directly determining which brand vendors will come out winners in

the tablet market, although this control of course does not extend to Apple.

If the Nexus range is not included in calculations, Digitimes Research projects that • If the Nexus range is not included in calculations, Digitimes Research projects that

branded Android tablet shipments will total 17.6 million in 2012, rising just 6% in 2013

to 18.7 million.

• Total shipments of 19 million for the whole Nexus range in 2013 will double the size of

the potential market for tablet brands other than Apple to 37.7 million units, with the

result that whichever brands land the opportunity to collaborate on Google two

forthcoming seven-inch models will be the winners in 2013.


Chap. 3.4MicrosoftMicrosoft


Quarterly revenues for Microsoft divisions corresponding to Windows and Office, 2009-2012

6,000

7,000

8,000

Windows & Windows Live Division Microsoft Business Division

Unit: US$m

0

1,000

2,000

3,000

4,000

5,000

6,000

1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12

1


Effects of PC industry decline - Growth in Office slows, while Windows undergoes a Q/Q contraction

• Since the launch of the iPad, the PC market has gone from growth

into decline. Digitimes Research projects that notebook shipments

will contract 4.3% on 2011 levels.

• As a result, revenues from Microsoft’s Business Division, which is

focused on Office and accounts for around one third of the

company’s total revenues, have seen limited growth since 2010.company’s total revenues, have seen limited growth since 2010.

• The Windows & Windows Live Division, which accounts for 25-30%

of company revenues, has seen revenues contract for five successive

quarters, with its share of all company revenues slipping to 20% in

the third quarter of 2012.


Microsoft’s Surface shipment targets (as provided by the upstream supply chain), 2012-2013

8-12Unit: m units

3-5

2012 2013

2


Microsoft fights back in the tablet market with the Surface, sets 2013 shipment targets of around 10m

• Faced with PC vendors’ seeming inability to fight back against Apple in the tablet

sector, Microsoft finally entered the mobile device market itself on October 24, 2012,

when the Surface tablet was officially launched.

• Information obtained by Digitimes Research shows that Microsoft ordered the

equivalent of shipments of three to five million Surface tablets from the supply chain in

2012, and has set a 2013 shipment target of 8.0 million units.

• However, the supply chain is concerned that the market will not necessarily accept the

Surface, and shipment forecasts for the surface are therefore generally conservative.

• Digitimes Research projects that Surface shipments will reach 2.5 million in 2012,

rising to 8.0 million in 2013.


Surface pricing strategy analysis

9.7” iPad Transformer TF300

3

Surface RT versionUS$499, 32GBUS$599, 32GB+Touch CoverUS$699, 64GB+Touch Cover

9.7” iPadUS$499, 16GBUS$599, 32GB

Transformer TF300US$399, 32GBUS$499, 64GB

• 16GB storage space common at the US$499 price point

• Keyboards common at the US$599 price point

A price difference of US$100 leaves OEM partners sufficient margins after hardware costs to pay Microsoft’s licensing fees for Windows RT and Office


The RT version of the Surface is priced from US$499, making it competitive and profitable

• The main factor in the supply chain’s pessimistic view of Surface sales is concerns over its

high price.

• Microsoft announced prices of the RT version of the Surface some time ago, with the 32Gb

version selling for US$499 or $599 with the Touch Cover keyboard cover.

• Digitimes Research believes that the pricing of the Surface RT is appropriate; it is

comparable to the 32GB version of the 9.7-inch iPad, and with the Touch Cover it is well comparable to the 32GB version of the 9.7-inch iPad, and with the Touch Cover it is well

positioned to exploit the functionality of Office.

• 10.1-inch Android tablets from Microsoft’s Windows tablet OEM partners are priced around

US$100 cheaper, leaving OEMs ample room to pay licensing fees for Windows RT and

Office, while still covering product costs and retaining profit margins.

• While the price of the Surface may be attractive, its operating system is untested and its

app ecosystem is inadequate; companies in the supply chain are therefore still concerned

about its acceptability to consumers.


Forecast of global shipments of mobile computing devices, 2007-2015

300

400

500

Unit: m units

2007 2008 2009 2010 2011 2012 2013 2014 2015

Tablets (excluding Surface) 0 0 0 20 63 102 132 160 190

Surface 0 0 0 0 0 3 8 15 20

Notebooks 104 138 165 198 203 194 192 196 200

0

100

200

4

Note: Tablet shipments do not include white box tablets.


Will Surface growth come from replacing notebooks or tablets?

• Microsoft has positioned the Surface as an innovative product that

caters for demand from both the notebook and tablet sectors of the

mobile computing device market.

• It is difficult to project growth for the Surface before the market has

had time to determine its success.had time to determine its success.

• However, analysis shows that the main growth driver for the Surface

will come from replacing notebook or tablets, which is still helpful to

any effort to determine the Surface’s market potential.


Competing ecosystems could make it difficult for the Surface RT to move into the tablet market

Obstacles to entry come from the software/app

ecosystemTraditional PC software ecosystem

App ecosystems (Apple, Google)

Replacement, obstacle to entry

Mutually complementary

Tablet market

Notebook market

X86 versionRT

version

5

Strength of Microsoft’s shipments (attack)

→★★★★★★←


Competing ecosystems could make it difficult for the Surface RT to move into the tablet market

• There will be both Windows RT and x86 (Windows 8 Pro) versions of the Surface.

• User ratings of the hardware design are positive, with the performance of the Kick Stand,

Touch Cover and Office coming in for particular praise.

• Despite some continuing shortcomings when used away from the desktop environment, the

Surface has the potential to cater for notebook users at least to some extent, for example by

using it resting on the lap.using it resting on the lap.

• The x86 version of the Surface will be compatible with Windows PC software, making it more

suitable as a replacement for a notebook.

• Nevertheless, Microsoft’s hopes for the tablet market rest mainly on the RT version, but the

weakness of its ecosystem compared to the enormous ecosystems already built by Apple and

Google may hinder the Surface’s move into this market.

• The Surface is therefore inherently well placed to replace notebooks, but less well positioned

to replace tablets. Replacing notebooks with the Surface is nevertheless still beneficial to

Microsoft, and so the company is focusing on the RT version in terms of shipments.


Surface tablets will not find it easy to move into the small tablet sector

6.1

0.7

7.x" 8.x" 9.x" 10.x" 11.x" Move in

Quarterly tablet shipments by size, 2012

Unit: m unitsCompete

4.4 2.7 5.2

15.6

13.1 15.1 15.2

17.0

1.2 1.6 2.7 0.3

1Q12 2Q12 3Q12(e) 4Q12(f)

Smaller devices are already the main

source of growth for tablets

9.7” iPad shipments will fall, but this is mainly due to the launch of the iPad mini

Apple has already moved into the small tablet sector

Surface devices will struggle to compete in the small tablet sector

6


Surface tablets will not find it easy to move into the small tablet sector

• The tablet market reached a turning point in the second half of 2012, with

smaller models becoming the key growth drivers for the future of the market.

• The Surface is targeted squarely at the market for larger tablets and the iPad

in particular, however, Apple has already moved into the small tablet sector

with the launch of the iPad mini.with the launch of the iPad mini.

• The Surface is not well suited to a move into the small size sector, which

makes it uncompetitive in some respects.

• The ability to create Office documents are the major selling point for the

Surface, which limits its positioning to the large size sector.

• Windows RT and Office take up a considerable amount of storage space,

making it difficult for Microsoft to launch 8GB or 16GB entry level models.


Various Microsoft divisions are adapting to the imminent crisis with different strategies

3

4

5

6

7

Importa

nce

of p

rofita

bility

(in

fluence

of d

ivisio

n)

Cross-platformOffice

Cross-platform Xbox content

Surface, Office bundled with Windows, WP

Office 360

Skype, MSN and other servicesincrease cohesion for Windows

Nook HDtests the water

Free Xbox Music streaming will help to sell WindowsHolding on to

the business market

Bing continues totake on Google

0

1

2

3

Device OS Software, App Content Cloud Service Ad

9

Importa

nce

of p

rofita

bility

(in

fluence

of d

ivisio

n)

Windows & Windows Live

Entertainment & Device

Microsoft Business

Entertainment & Device

Online Services

Server & Tools

Microsoft Business

Windows & Windows Live

Office 360provided on a fee-

paying basisNook Video

tests the water

take on Google


Various Microsoft divisions are adapting to the imminent crisis with different strategies

• However, internal strife at the company poses a challenge to Steve Ballmer’s leadership

and adds another variable to the firm’s ability to carry out a smooth transition, just at the

moment that Windows 8 is launched and Microsoft formally moves into the mobile sector.

• Digitimes Research believes that the main issue for Microsoft’s management is that the

relationship between the Windows, Office and other software and service departments

has already changed.

• At such a time as the platform is no longer capable of delivering growth, or even of

ensuring the future of Microsoft’s software and content departments, should these

departments move closer to Windows to compete with iOS and Android, or should they

move away from Windows and towards a cross-platform strategy?

• Digitimes Research believes that with the revenue share of the Windows & Windows Live

division falling to just 20%, the importance and influence of the division within the

company will fall, while voices calling for a cross-platform transition for software and

content will carry greater weight in the future.


Chap. 3.5AmazonAmazon


Amazon’s Kindle Fire product line

Model Fire Fire HD Fire HD 8.9” Fire HD 8.9” 4G

Screen size 7” 7” 8.9” 8.9”

Resolution 1024x600 1280x800 1920x1200 1920x1200

Processor OMAP 4430

Storagecapacity

8GB 16GB 32GB 16GB 32GB 32GB 64GB

Price (US$) 159 199 249 299 369 499 599

1


Amazon’s Kindle Fire product line becomes more comprehensive

• Amazon launched its new Kindle Fire range on September 6, 2012,

consisting of three models with differing screen resolutions priced from

US$159 to US$599.

• The Kindle Fire HD, codenamed Tate, is being built by Quanta.

The Kindle Fire HD 8.9”, codenamed Jem, is being built by Foxconn.• The Kindle Fire HD 8.9”, codenamed Jem, is being built by Foxconn.


Kindle shipments, 2008-2012

3.5

e-readers Tablets

Unit: m units

0.5 2.4

6.9

17.0

5.3

10.8

2008 2009 2010 2011 2012(e)

1


Shipments of Kindle devices fall to 16.1m in 2012

• While Kind Fire shipments in 2012 have seen major growth on 2011

levels, overall Kindle shipments – including both tablets and e-readers –

are actually lower than 2011 at around 16.1 million units.

• Digitimes Research believes that Amazon’s edge in terms of digital

content, online sales and other member services is still restricted largelycontent, online sales and other member services is still restricted largely

to the European and North American markets, while the company’s

closed-platform strategy will similarly impede the regional expansion of

the Kindle Fire.


Deriving Kindle Fire gross profits

199

82

140

50

37 35

2923

50

100

150

200

250Unit: US$

5982

0

50

8


Each Kindle Fire creates US$286 of revenue with a margin rate of 28.7%

• As previously noted by Digitimes Research, the first-generation

Kindle Fire delivered revenues of US$286 per unit with a profit

margin rate of 28.7%.


Amazon’s Kindle Fire margin rates

60

80

100

120

Unit: US$

99 120 37 35

-40

-20

0

20

40

Kindle Fire sales

Kindle Fire costs

Kindle Fire margins

e-reader revenues

Mobile payment revenues

e-reader profit

sharing

Mobile payment

sales costs

Kindle Fire derivative

profits

Total gross profits

9

-21

5029

23

2


Amazon Kindle Fire margin rates

• However, the potential launch of Google’s US$99 Nexus tablet would give Amazon

a difficult choice as to whether it should continue to participate in the price war.

• Taiwan-based ODMs minimum shipment price for seven-inch tablets is still US$120,

which would leave Amazon with a final margin rate of little more than 1% if it also

sold a Kindle Fire model for US$99.


Kindle Fire margin rates would still be 14.8% if it was sold for a price slightly higher than hardware costs

129 12037 35

2960

80

100

120

140

Unit: US$

932

5029

23

0

20

40

10


Kindle Fire margin rates would still be 14.8% if it was sold for a price slightly higher than hardware costs

• Amazon could keep margin rates about 15% if it abandoned the price war

and sold the Kindle Fire at price higher than the cost of the hardware, but

such a move would be a significant obstacle to the firm’s ability to expand

Kind Fire sales.

• Regardless of whether Amazon moves to keep up with the US$99 price

point if Google launches such a device, it will no longer be beneficial forpoint if Google launches such a device, it will no longer be beneficial for

the company to maintain its own hardware brand, making it likely that the

company will move further towards a cross-platform strategy.


Chap. 4

2013 global tablet industry forecast2013 global tablet industry forecast


Overview

• In summary, analysis of the major platform companies and white box

tablet makers leads Digitimes Research to project that 2013 will see

global tablet shipments grow 38.3% year on year to 210 million units,

overtaking notebook shipments for the first time; even if only

branded tablets are factored in, tablet shipments will still reach 144

million units in 2013.million units in 2013.

• Digitimes Research also forecasts that total global tablet shipments will reach 318 million by 2015, with branded tablets accounting for 220 million units and white box tablets accounting for as much as 100 million units.


Chap. 4.1


Global tablet shipments (Including white box), 2010-2015

Unit: m units

20.6 73.3

154.8

214.0 268.5

318.0

2010 2011 2012(e) 2013(f) 2014(f) 2015(f)

１


Global shipments of branded and white box tablets will exceed notebook shipments for the first time in 2013

• Digitimes Research projects that total tablet shipments, including both

branded and white box models, will grow 111% on 2011 levels to

reach 155 million units in 2012.

• Digitimes Research also forecasts that total global tablet shipments

will grow 38.3% year on year to 210 million units in 2013, overtaking

notebook shipments for the first time.

• Tablet and notebook shipments will collectively reach 403 million units in 2013, with tablet shipments greater than notebook shipments at a ratio of 53:47.

• Total global tablet shipments will reach 318 million by 2015,

representing more than 100% growth from the 2012 figures.


Global shipments of branded tablets (Excluding white box), 2010-2015

Unit: m units

20.6

63.3 103.9

144.0 183.5

220.0

2010 2011 2012(e) 2013(f) 2014(f) 2015(f)

2


Branded tablet shipments are also forecast to surpass notebooks in 2015

• If only branded tablets are factored in, tablet shipments will still reach

144 million units in 2013 with a growth rate of 38.6%.

• Global shipments of branded tablets will reach 220 million units by

2015, greater than the projected figure of 194 million for notebooks in

that year.


Global shipments of branded and white box tablets, 2010-2013

70

120

170

220

Unit: m units

+75%

+38%

+65%

+409%

2011 2012(e) 2013(f)

Total 73.3 154.8 214.0

White box 10.0 50.9 70.0

Other mainstream brands 22.3 38.9 64.0

Apple 41.0 65.0 80.0

-30

20

70

3

+23%

+75%

+59%


Apple will see slower growth than other brands and white box tablets in 2013

• Tablets can be divided into three main categories for the purposes of analysis: Apple

(iPad), other major brands (non-iPad), and white box. Digitimes Research forecasts that

growth rates for other major brands and the white box sector will be higher than for

Apple in 2013.

• While Apple has launched the iPad mini, its high price and the fact that growth in sales of the smaller model will come largely from cannibalizing sales of the 9.7-inch iPad, Apple’s growth rate is expected to slow down.iPad, Apple’s growth rate is expected to slow down.

• iPad shipments are lower than iPhone shipments at a ratio of 3:7, with the iPhone acting to drive iPad growth; however, the growth rate of the iPhone in the smartphone market is also slowing down.

• The entry of Google and Microsoft into the market will push the combined grow rate for other major brands up 27 percentage points to around 64% in 2012.

• White box tablets have seen explosive growth in 2012, but growth is expected to slow in 2013, as a high base level has now been established and prices of branded tablets fall closer to white box prices.


Global tablet shipments by brand, 2011-2013

40

60

80

100

Unit: m units

Apple Google AmazonSamsun

gMicroso

ftAsus Lenovo B&N Acer

Other tier 1

brands

White box

2011 41.0 0.0 3.5 4.6 0.0 1.5 1.1 2.9 1.9 6.8 10.0

2012(e) 65.0 4.9 10.8 7.4 2.5 2.7 2.1 2.5 1.5 4.5 50.9

2013(f) 80.0 19.0 10.5 9.5 8.0 5.0 3.0 2.5 1.8 4.7 70.0

0

20

4


Rankings dominated by the big 5, number of players set to shrink further

• Major brand vendors such as Apple, Google, Amazon and Microsoft all launched their latest products in

September and/or October 2012. Digitimes Research projects that the top five branded tablet vendors in

2013 in order will be Apple, Google, Amazon, Samsung and Microsoft.

• Apple will retain the top spot, but its growth will slow, largely due to high prices and the slowdown in the growth of the iPhone, which has acted as a growth driver for the iPad in previous years.

• Google’s tablet shipments could reach 19 million if it launches low-end, midrange and high-end Nexus tablets as expected.

• As shipment figures for Google already include all Nexus devices, the Nexus 10 is not included in Samsung’s shipments and the Nexus 7 is excluded from Asus’ shipments.Samsung’s shipments and the Nexus 7 is excluded from Asus’ shipments.

• Digitimes Research is conservative about the prospects for Amazon tablets in 2013, largely due to Google’s aggressive pricing and the obstacles to expansion in other markets created by the limitations of Amazon’s content ecosystem and product strategy.

• Samsung‘s shipments are likely to be roughly on a bar with Amazon in 2013, although it would in fact surpass Amazon by a significant degree if Nexus 10 shipments were included in its shipments; it will also be the only hardware brand vendor in the top five tablet brands in 2013.

• Microsoft aims to ship eight to twelve million tablets in 2013, but given Steve Ballmer’s comments that Surface sales were “modest”, Digitimes Research projects that actual shipments will be at the lower end of this range, i.e. around eight million units.

• Asus and Lenovo will still see growth, but other brands will mostly see shipments level off or decline.


Global tablet shipment share by vendor, 2013

Apple Samsung White boxAmazon Microsoft+B&N Google Other tier 1 brands

7%

7%

10%

37%33%

56%

13%

7%

7%

9%5%5%

4%

7%

144m units (excluding white box)

214m units (including white box)

5


The big 4 platform firms are forecast to take more than 80% of branded tablet shipments

• The tablet market will become more concentrated in 2013, with the top four

brands accounting for more than 80% of branded tablet shipments.

• Apple is forecast to take 56% of branded tablet shipments, a seven point drop on 2012 levels.

• Google is expected to increase its share of branded tablet shipments by nine percentage points on 2012 levels to 13% in 2013.nine percentage points on 2012 levels to 13% in 2013.

• Shipments for Amazon, Microsoft + B&N, and Samsung will be roughly on a par with one another.

• If white box tablets are factored in, Apple’s 2013 shipment share will fall to

37%, while other brand vendors’ shares will all drop below 10%, giving the

white box sector one third of the tablet market as a whole.


Chap. 4.2


60.3

75.6

41.2

Global branded tablet shipments and shipment share for different size tablets, 2013

28.6

13.7 13.3

0.4

80%

100%

Unit: m units

3.7

Unit: %7.x” >11”

8.x” 9.x” 10.x”

6

27.6

1.3

14.2

0.4 2.7

41.2

19.2

5.3

7.x" 8.x" 9.x" 10.x" >11"

26.6

52.5 1.3

1.9 58.1

28.6

2012(e) 2013(f)

0%

20%

40%

60%

Note: Figures on the left of each bar represent 2012, figures on the right represent 2013


Share of 7-inch devices in global branded tablet shipments will climb above 50% in 2013

• Shipments of 7.x” models in the branded sector will shoot up 174% on 2012 levels to 75.6 million units

in 2013.

• 7.x” models’ shipment share will rise to 52.5%, making this the mainstream size for branded tablets.

• 8.x” models will re-enter the branded sector thanks to Amazon, and should see shipments double from

2012 levels to 2.7 million units in 2013 if shipments remain strong throughout the year, although the

shipment share of this size segment is likely to remain below 2%.

Following the launch of the iPad mini, shipments of 9.x models, which were previously the mainstream • Following the launch of the iPad mini, shipments of 9.x models, which were previously the mainstream

size, will drop from 60.3 million in 2012 to 41.2 million in 2013.

• Their share of shipments will also fall by close to 30 points from 58.1% in 2012 to 28.6% in 2013.

• While the mainstream of the market may be moving towards the seven-inch class, the Surface and the

Nexus 10 will continue to bolster 10.x” shipments in 2013, with shipments of this size segment likely to

reach 19.2 million units or 13.3% of overall shipments.

• Windows will be the main growth driver for 11-inch and larger sizes in 2013, while part of notebook

book sector will transition to convertible tablets, strengthening shipments of tablets in this size class.


135.8

Global branded and white box tablet shipments and shipment share for different size tablets, 2013

4.6 41.1

20.9

10.3 9.6 0.3

60%

80%

100%

Unit: m units

3.4

Unit: %7.x” >11

”8.x” 9.x” 10.x”

7

69.3

6.4

62.8

15.8

0.4 8.3

44.0

20.6

5.3

7.x" 8.x" 9.x" 10.x" >11"

44.3

62.6

4.1

4.6

2012(e) 2013(f)

0%

20%

40%

60%



More than 90% of shipments of branded and white box tablets are in 7.x- and 9.x-inch sizes

• Including both branded and white box units, shipments of 7.x” tablets will

grow 96% year on year to 136 million units in 2013.

• The overall shipment share for this size class will hit 62.6%.

• The bulk of white box shipments will come from 7.x” and 8.x” models, with

the white box sector contributing relatively little to shipments of larger size

products.

• 9.x” models share of combined branded and white box tablet shipments

will drop by half from 41.1% in 2012 to 20.9% in 2013.

• Size classes other than 7.x” and 9.x” will all account for less than 10% of

overall tablet shipments.


Global branded tablet shipments and shipment share by platform, 2012-2013

33.935.2

3.6 9.2

60%

80%

100%

65.0

80.0

50.7

Unit: m units Unit: %iOS WindowsAndroid

62.655.6

2012(e) 2013(f)

0%

20%

40%

60%

8

35.2

3.7

13.3

iOS Android Windows



iOS share of branded tablets will decline slightly in 2013 but is still likely to remain close to 60%

• Looking at shipments by platform, iOS will grow 23.1% to a projected 8.0

million units in 2013, but its share of branded tablet shipments will decline

seven points on 2012 levels to around 55.6%.

• Android and Windows will both see their shipments and shipment share

increase in 2013.

Android shipments will rise to 50.7 million units, while the platform’s • Android shipments will rise to 50.7 million units, while the platform’s share of branded tablet shipments will rise by a meagre 1.3 points to 35.2%.

• Windows tablet shipments are forecast to hit 13.3 million units for a growth rate of 260%, with the shipment share rising by 5.6 percentage points to 9.2%.


Global branded and white box tablet shipments and shipment share by platform, 2012-2013

55.6 56.4

2.4 6.2

60%

80%

100%

65.0

86.1 80.0

120.7

Unit: m units Unit: %iOS WindowsAndroid

42.0 37.4

2012(e) 2013(f)

0%

20%

40%

60%

9

65.0

3.7 13.3

iOS Android Windows



If white box shipments are not counted, Android share increases by just 1 point

• When white box tablets are factored in, Android’s shipments and

share of shipments rise significantly.

• Combined shipments of branded and white box Android tablets will

grow 40.2% to hit 121 million units in 2013.

• While Android shipments will grow by 34.6 million units, this increase • While Android shipments will grow by 34.6 million units, this increase

will make only a limited contribution to shipment share for the

platform, which will rise 0.8 points from 55.6% in 2012 to 56.4% in

2013.


Global shipments and shipment share for various Android tablet brands, 2012-2013

59.1 58.0

80%

100%

50.9

37.7

70.0 Unit: m units Unit: %

Official Android White box AndroidAmazon+B&N

24.2 31.2

16.6 10.8

2012(e) 2013(f)

0%

20%

40%

60%

10

20.9 14.3 13.0



Ultra-low priced Nexus tablets more likely to take share from Amazon and B&N rather than white box makers

• Android will become the largest tablet platform over the whole year in 2012, and will continue to lead in

2013. However, the official Android models that bring genuine benefits for Google continue to account for

only a small share of shipments.

• All branded tablets other than models from Amazon and B&N use official, Google-certified versions of Android.

• White box vendors are mostly not Google certified.

• As a result, shipments of branded Android tablets excluding Amazon and B&N are already approaching shipments of official Android models.

Digitimes Research believes that Google is highly likely to follow the Nexus 7 and Nexus 10 by launching • Digitimes Research believes that Google is highly likely to follow the Nexus 7 and Nexus 10 by launching

an ultra-cheap Nexus tablet in 2013, with a target price of US$99.

• Google’s heavy promotion of Nexus tablets will help to push official Android’s shipment share up from 24.2% in 2012 to 31.2% in 2013.

• Digitimes Research projects that Amazon and B&N will suffer most from the success of the Nexus range, with their collective shipment share set to fall from 16.6% in 2012 to 10.8% in 2013.

• The impact on the white box sector will depend on Google’s channel strategy for the ultra-cheap Nexus model. If shipments are concentrated in Europe and North America, the impact on the white box sector is likely to be small.


Global shipments and shipment share for each type of Windows tablet, 2012-2013

32.4 39.8

60%

80%

100%8.0

5.3

5.0

6.0

7.0

8.0

9.0

Unit: m unitsUnit: %

Surface Windows models from other brands

67.6 60.2

2012(e) 2013(f)

0%

20%

40%

60%

11

2.5

1.2

0.0

1.0

2.0

3.0

4.0

5.0

Surface Other brands

2012(e) 2013(f)



Microsoft is projected to take more than 60% of Windows tablet shipments

• The launch of Windows 8 is likely to tempt PC vendors to transition a

portion of their notebook models into convertible tablets.

• Digitimes Research projects that shipments of Windows tablets by hardware brand vendors will grow 341% on 2012 levels to 5.3 million units in 2013.

• However, this 5.3 million total will represent just 3.7% of branded tablet shipments in 2013, and just 2.5 million of all tablet shipments if tablet shipments in 2013, and just 2.5 million of all tablet shipments if white box models are factored in.

• Microsoft is attempting to bolster Windows’ shipment share with shipments

of the Surface, which are projected to hit 2.5 million in 2012 and 8.0

million in 2013.

• Digitimes Research projects that the Surface will account for 67.6% of Windows tablet shipments in 2012, falling to 60.2% in 2013.


Tier 1 hardware brand vendors’ tablet shipments and shipment share, 2012-2013

9.3 22.1

80%

100%

11.7

18.7

█ Branded Android (excluding Nexus) █ Branded Windows (excluding Surface)

Unit: m units Unit: %

90.7 77.9

2012(e) 2013(f)

0%

20%

40%

60%

12

11.7

1.2

5.3

Branded Android Branded Windows



Tier 1 hardware brands’ share of Windows tablet shipments will grow in 2013

• In order to expand their share of shipments in the tablet sector as a whole, Google and Microsoft need

to compete with their own branded hardware, but must also gain the support of hardware brand

vendors.

• Hardware brand vendors’ allocation of resources between Android and Windows will be key to

Microsoft’s ability to compete with Google.

• Digitimes Research projects that hardware brand vendors will ship 12.9 million tablets in 2012,

excluding the Nexus 7 and the Surface.

Android accounts for 11.7 million or 90.7% of this figure.• Android accounts for 11.7 million or 90.7% of this figure.

• Windows accounts for 1.2 million or 9.3%.

• Hardware brand vendors are projected to increase their tablet shipments by 86% on 2012 levels to 24

million units in 2013.

• Android will account for 18.7 million or 77.9% of this figure.

• Windows will account for 5.3 million or 22.1% of this figure.

• While Windows’ share of hardware brand vendors’ shipments will increase, Digitimes Research believes

that much of this increase will come from the fact that many PC vendors’ resources are largely derived

from their PC divisions that have for so long been dominated by Windows, rather than any real success

in tempting hardware brand vendors to switch resources from Android to Windows.


Shipments of convertible tablets, 2011-2013

6,000

8,000

10,000

Unit: k units

2011 2012(e) 2013(f)

Windows 0 620 4,800

Android 1,300 2,240 3,000

0

2,000

4,000

13


Convertible tablet shipments are forecast to soar in 2013, while Windows models are likely to overtake

Android in the convertible sector

• Digitimes Research projects that the bulk of Windows tablets launched by

hardware brand vendors will be convertible models, with shipments forecast to

hit 4.8 million units in 2013.

• If Android models are factored in, shipments of convertible models will grow

171.5% on 2012 levels to 7.8 million units in 2013, accounting for 5.4% of all 171.5% on 2012 levels to 7.8 million units in 2013, accounting for 5.4% of all

tablet shipments.

• Digitimes Research defines convertible models as tablets and therefore believes

that Windows 8 will hasten the contraction in notebook shipments.

• Digitimes Research projects that notebook shipments will decline 1.4% in 2013. However, if Windows-based convertible models are categorized as notebooks as they are by some PC vendors, notebook shipments would grow by 1% in 2013.


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