Low Prices are Driving Rapid Tablet Adoption, Where Does That Leave Surface?

Paul Lilly

IDC says tablet shipments grew by three quarters in 2012.

Analysts came up short in predicting just how popular tablets would be in 2012, which according to preliminary data from International Data Corporation (IDC) grew 75.3 percent year-over-year in the fourth quarter. Tablet shipments topped 52.5 million units worldwide in Q4, and to put that number into perspective, the same research firm says PC shipments reached 89.8 million units in the same quarter.

Don't worry, PCs aren't going anywhere, not as long as companies like Lenovo keep setting records . Still, tablets are coming into their own at a remarkable pace. That Q4 shipment total? It represents a 74.1 percent growth rate over the previous quarter.

"We expected a very strong fourth quarter, and the market didn't disappoint," said Tom Mainelli, research director, Tablets, at IDC. "New product launches from the category's top vendors, as well as new entrant Microsoft, led to a surge in consumer interest and very robust shipments totals during the holiday season. The record-breaking quarter stands in stark contrast to the PC market, which saw shipments decline during the quarter for the first time in more than five years."

IDC credited the staggering growth on lower average selling prices (ASPs), an expanding range of product offerings, and increased holiday spending, all of which worked together to boost tablet sales. But if lower prices are what's driving the market, what does that mean for Microsoft's Surface RT and Pro, which start at $499 and $899, respectively?

"There is no question that Microsoft is in this tablet race to compete for the long haul. However, devices based upon its new Windows 8 and Windows RT operating systems failed to gain much ground during their launch quarter, and reaction to the company's Surface with Windows RT tablet was muted at best," said Ryan Reith, program manager, Mobile Device Trackers at IDC. "We believe that Microsoft and its partners need to quickly adjust to the market realities of smaller screens and lower prices. In the long run, consumers may grow to believe that high-end computing tablets with desktop operating systems are worth a higher premium than other tablets, but until then ASPs on Windows 8 and Windows RT devices need to come down to drive higher volumes."

That's a bit of problem for Microsoft. It's easy to say that Microsoft needs to launch a lower priced tablet with a smaller screen size, a strategy that's been proven to work for Android, but such a device might take away from the appeal of Windows RT/8. Surface is intended to be an extension of the desktop, and that could be a hard sell in a 7-inch form factor.

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