Why the iPad Mini Is a Disruptive Technology

The "PC Cliff" -- and why small tablets will become the most important tablets for consumers.

  • Share
  • Read Later
Apple

Now that the iPad Mini has been out for a while and many of us at Creative Strategies have been testing them, it is becoming clear to us that this 7.9” form factor (or most 7” inch models) will become the most important tablets for consumers in the future.

There are a lot of reasons for this, but the main one is that these tablets are light, thin and, in the iPad Mini’s case, deliver a best in breed tablet experience. Also, these smaller tablets will always be cheaper than larger tablets because the bill of material (BOM) cost for smaller versions will always be less than the bigger models.

As I have personally used the iPad Mini for some time now, I have begun to see my usage patterns with tablets change significantly. Before the iPad Mini, the tablet I used the most was the full-size iPad. Although I also used my 7-inch Kindle Fire HD often for reading and media consumption, the iPad was my real go-to tablet device. And it became even more important to me once I added the Logitech Ultrathin Keyboard Cover to it: It’s now used for content consumption as well as productivity.

However, there is an 80/20 rule that is becoming an important metric when it comes to tablets and PCs. It turns out most consumers can do about 80% of the most common tasks they do with a PC on a tablet, and any other key tasks, such as media management, large spreadsheets, music and video servers, and the like are designated to the computer. But once I started using the iPad Mini, I found that it became my go-to device because of its lightweight, small size and literal duplication of everything I have on the iPad.

There is an interesting twist to this. When my only tablet was my iPad, I defaulted to my laptop for heavy lifting tasks. But once I started using the iPad Mini, I found myself defaulting to the 9.7” iPad with its keyboard as my main productivity device. I found that in this case, a 90/10  rule kicked in. I spent 90% of my time on these tablets and only about 10% on my laptop.

Now I realize that this may not be a broad trend, but we are hearing the same type of feedback in our early consumer interviews. Although fresh and not fully completed research, many people who have an iPad Mini are sharing similar stories. Almost all that we talked to told us that the role of the laptop has diminished for them significantly since they got the iPad, and were now using the iPad Mini more frequently than their larger iPads.

When I asked them if they were interested in buying a new Windows PC or laptop, their comments were pretty consistent. They said that if the PC were only used 10-20% of the time, they would most likely just extend the life of their PCs or laptops instead of buying new ones. And if they did buy a new PC or laptop, it would be the cheapest they could find. They could no longer justify a more expensive and powerful version if it mostly sat at home and was used infrequently for more data- or media-intensive apps.

I suspect that this scenario with consumers may play out a lot more in the future, and at the very least, their tablets do handle the majority of their daily digital needs. I believe that a PC as we know it today will continue to lose its primary role in the home given its lack of use more often than not.

If this trend does play itself out as I have suggested, the impact on the traditional PC market could be very disruptive within two to three years. As consumers buy inexpensive small tablets that will only get better in performance, screen clarity and apps, the use of these tablets will supersede their PC use, and demand for PCs and laptops could decrease significantly.

While PCs and laptops will never go away, they may soon play a different role for consumers than they have in the past. And if tablets increase their role as the dominant devices consumers use to access the majority of their digital needs, then the impact on PC demand has to be affected down the road. In fact, some key industry insiders call this the “PC Cliff,” suggesting that we could see a time in the not-too-distant future where demand for PCs falls by a steep amount, giving way to tablets as the major growth segment of the PC industry.

Interestingly, there could be a silver lining for traditional PC vendors if they innovate quickly. In my comments above, I mentioned that the iPad Mini has now become my go-to tablet while the original iPad with the Logitech keyboard is now my cross over device handling consumption and productivity. And my use of my laptop has declined as a result of this. But for me, the iPad with a keyboard has become kind of a laptop replacement. It is touch based, lighter than any laptop I could ever own, has an average 10-hour battery life, is instant-on and runs most of the apps I need, as well as giving me a very rich web browsing experience.

But my iPad with keyboard is really what we in the industry call a hybrid. It’s a touch-based tablet tied to a detachable keyboard. Microsoft’s Surface falls into this category as does HP’s Envy X2 – which HP calls it a convertible. The nomenclature for this seems to be ever changing but we define a convertible as a tablet/keyboard combo that does not detach, while a hybrid is a tablet with a detachable keyboard.

The interest in the hybrids, as we define them, is high, especially in enterprise. However, the demand for Windows RT-based hybrids like the Surface is somewhat muted since it does not have backward compatibility with existing Windows software. Instead, the hybrids we are seeing great interest in, both with consumers and business users, are Windows 8 devices that use an x86 chip and have full backwards compatibility with existing Windows software, like HP’s Envy X2 Convertible. But if the scenario I suggest plays out, it will be these hybrids that drive some of the “laptop” sales in the future, while demand for more traditional laptops could wane.

I believe that the iPad Mini and smaller tablets will be even more disruptive to the traditional PC market than the full-size iPad has been to date. We can envision a time soon where a user has a 7” tablet that is used mostly for content consumption, email and web browsing, and a hybrid to pick up any productivity slack they may have. The bottom line is, the more consumers use tablets of either size, the more they realize that the laptop or PC in the home is overkill, and decide to either just keep the one they have longer or buy the cheapest PC they can for any extra computing needs they may have that a tablet can’t do.

There is another scenario that could play out that is not as drastic as a PC cliff. This is where people decide they want the best tablet they can buy as well as the best laptop, no matter its price. However, even if that does happen, the amount of premium laptops sold compared to cheap PCs will be small. Still, a premium PC or laptop has solid margins, while laptops under $499 have small margins.

I believe that some type of PC cliff could happen, and if so, it could change the fortunes of the traditional PC vendors considerably. We don’t ever expect the PC to go completely away, but its role in a family or even in business could change in ways we don’t even understand at this early stage of the tablet market. However, the more research we do on this subject, the more we see the writing on the wall. We think that the PC industry is going to suffer a major adjustment in the next two to three years.

Bajarin is the president of Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to Big Picture, an opinion column that appears every Monday on TIME Tech.