What it is: Phablets are large phones that combine the features of a smartphone with a screen size close to a tablet.
Samsung is largely credited with promoting the phablet market by making smartphones with large screens. Of course, other companies had tried marketing larger smartphone screens earlier, but for some reason, Samsung’s products seemed to catch the public’s attention. The Dell Streak was actually one of the earliest phablet designs but failed to gain many sales.
Phablets originally grew out of the inability of most manufacturers to cram smartphone features in a smaller package. So they just made a larger smartphone case to hold a bigger battery. As tablets exploded in popularity, led by the iPad, people started carrying two devices: a smartphone and a tablet.
When Samsung started marketing larger smartphones dubbed phablets, people suddenly saw less of a need for a separate tablet and more of a need for a phablet. When Apple introduced the larger screen iPhone 6 and iPhone 6 Plus, sales broke quarterly records. Some people who originally chose Samsung phablets switched to the iPhone 6. In the meantime, phablet sales cannibalized tablet sales, even smaller tablets like the iPad mini.
On one hand, you can look at declining tablet sales as a worrisome trend for Apple. On the other hand, greater sales of the iPhone more than makes up the difference. At one time, Apple sold tons of iPods, but when they introduced the iPhone, which was essentially an iPod with a phone, sales of iPods dropped and will never recover any time in the future.
The lesson is clear. When one product kills another product, there’s little hope for that other, less versatile product. Sales of the iPod can never compete against sales of the iPhone since anyone with an iPhone already has a built-in iPod.
Likewise sales of tablets will never grow dramatically again since anyone who has a phablet already has (to some extent) a tablet. Despite dropping sales of tablets (like dropping sales of iPods), increased sales of iPhones more than makes up the difference.
The growing popularity of phablets isn’t a problem for Apple, but for Microsoft. As Forbes explains, Microsoft missed the mobile trend so they don’t have a viable smartphone to sell and only a weak tablet (Surface Pro) to sell. The problem is, the Surface Pro has entered the tablet market just as the popularity of tablets has started to decline. What more people want nowadays aren’t tablets but phablets, but Microsoft doesn’t have a viable phablet to sell.
As Forbes points out, “Microsoft missed the trend to mobile. They didn’t prepare for it in any of their major products, and they let new products, like music player Zune and Lumia phones, languish – and mostly die. By the time Microsoft reacted Apple and Samsung had enormous leads. Microsoft is still trying to play catch-up with its ‘core’ Windows product.
“But worse, because it is so far behind, Microsoft’s leaders are unable to forecast where the market will be in 3 years. Consequently they develop products for today’s market, like tablets (and their hybrid products,) which we now see will be obsolete as the market shifts to new products (like phablets.)
“Lesson for everyone – be sure your business keeps its eyes on trends, and does not wait to react. Waiting can turn out to be deadly.”
The trend is towards mobile and wearables. The trend is not back towards desktops and laptops. The Surface Pro, along with other 2 in 1 hybrids, attempts to bridge the gap between laptops and tablets, both of which are shrinking markets. The future is mobile led by the new hybrids that combine smartphones and tablets.
Apple is leading the trend towards mobile and wearable computers so worrying about declining iPad sales is like worrying about declining iPod sales. Ideally you want all your products to sell equally well and continue growing, but realistically that’s not always possible. If a product declines, you want to be selling something that’s killing your current product line like Apple is doing with the iPhone to make up for declining iPad sales.
Every product line will eventually die. There may come a time when the wearable computer market starts cannibalizing the mobile computer market. The Apple Watch will only get more powerful and could start replacing the iPhone, but at least Apple will still make money selling the Apple Watch just like they’re still making money selling the iPhone instead of the iPad.
Other companies, like Microsoft, are simply unable to sell products that follow the trend. Where Apple is fine, companies like Microsoft are not, and it’s all because Apple is leading the trend while companies like Microsoft react and follow too late.