Is the iPad mini disruptive for PC manufacturers?

Is the iPad mini disruptive for PC manufacturers?

Many of us at Creative Strategies have been testing iPad minis for a few weeks now and it is growing clearer that this smaller tablet form factor will become the most important tablet for consumers in the future. The main reasons are that it’s light, it’s thin, and, in the iPad’s case, it delivers an excellent tablet experience. Also, these smaller tablets will always be cheaper than larger tablets because the bill of materials will always be less expensive than that of the bigger models.

Using the 7.9in iPad mini for some time, I have noticed my usage patterns changing significantly. Before the iPad mini, my primary tablet was the larger iPad. Although I also used my Kindle Fire HD often for reading and media consumption, the iPad was my real go-to device. It became even more important to me once I added the Logitech Ultrathin Keyboard Cover, making it valuable for both content consumption and productivity.

However, the tablet 80/20 rule is becoming an important metric. It turns out most consumers can use a tablet to do about 80 per cent of the most common tasks they would previously have done on a PC, and any other key tasks, such as managing media, handling large spreadsheets, and organising music, are designated to the laptop. Once I started using the iPad mini, though, I found that it became my new go-to device.

But there is an interesting twist to this. When my main tablet was my iPad, I defaulted to my laptop for heavy-lifting tasks. Once I started using the iPad mini, I found myself defaulting to the larger 9.7in iPad with its keyboard as my main productivity device. In this case, a 90/10 rule kicked in, meaning I now spend 90 per cent of my time on these tablet solutions and only about 10 per cent on my laptop.

I realise that this may not be a sweeping trend, but in early interviews, many consumers have expressed similar usage patterns. Almost everyone that we’ve talked to told us that their laptop’s role has diminished significantly since they got the iPad, and they are now using their iPad minis more frequently than their larger iPads.

When I asked them if they were interested in buying a Windows 8 PC, their comments were pretty consistent. If the PC was only used 10 to 20 per cent 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, as they could no longer justify a more expensive and powerful version. I suspect that this scenario will become more common in the future and, as a result, the PC as we know it today will diminish in importance.

As tablet prices drop and performance, screen clarity, and apps improve, use and demand for PCs and laptops could decrease significantly, though not disappear altogether, within the next two to three years. In fact, some key industry insiders call this the “PC cliff,” suggesting that we could see a time in the not-so-distant future when PC demand falls off, giving way to tablets.

Recently, Nvidia CEO Jen-Hsun Huang made a key point during the latest earnings call. He said consumers realise “a great tablet is better than a cheap PC.” Interestingly, there could be a silver lining for traditional PC vendors if they innovate quickly.

The iPad with a detachable keyboard, my new secondary computing device, is really what we call a hybrid. Microsoft’s Surface falls into this category, as does the HP Envy x2 that it calls a convertible. The nomenclature for this seems to be ever-changing but I define a convertible as a tablet with a keyboard that does not detach, and a hybrid as a tablet with a keyboard that does detach.

There’s a great interest in these hybrids, although the demand for Windows RT-based hybrids like the Surface is somewhat muted since it does not have backward compatibility with existing Windows apps. Instead, the more popular hybrids, both with consumers and business users, are Windows 8 devices that use an x86 chip and have full backward compatibility with existing Windows software, as the HP Envy x2 does. It could be these hybrids that drive some of the “laptop” sales in the future, causing the demand for more traditional laptops to wane considerably.

I believe that the iPad mini and other small tablets will be even more disruptive to the traditional PC market than the iPad has been to date. I can envision a time soon where a user has a 7in tablet mostly for content consumption, email, and web browsing, and a hybrid to pick up any productivity slack.

The bottom line is, the more consumers using tablets, no matter their size, the more folks will realise that the laptop or PC in the home is overkill. They will therefore decide either just to keep the one they have longer, or buy the cheapest PC they can to cover their extra computing needs.

I can imagine another scenario that could play out that is not as drastic as a PC cliff. People could decide they want the best tablet they can buy in addition to the best laptop, no matter its price. However, even if that does happen, the amount of premium laptops sold compared with cheap PCs will be small. Still, a premium PC or laptop has solid margins while a budget laptop has pretty small margins.

I believe that a PC cliff could happen, and if so, it could change the fortunes of the traditional PC market a great deal. I don’t ever expect the PC or laptop to go away completely, but their roles in a household and even in a business could change in ways we don’t foresee at this early stage of the tablet market. However, the more research we do on this subject, the harder it is to ignore the fact that the PC industry may very well suffer a major disruption in the next two to three years.

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