Analyst: iPad 2 could lead to glut of rival tablets
Investors report from J.P. Morgan says that demand for Apple's iPad 2 could create an oversupply bubble for competing tablets, leaving rival companies with inventory they can't ship.
Demand for the iPad 2, which goes on sale tomorrow, could hurt rival tablet makers by sticking them with an oversupply of products they may not be able to sell.
That's the outlook of J.P. Morgan Research analyst Mark Moskowitz, who yesterday voiced his opinions in an investors report, which was sent to CNET.
In a race to catch up with the iPad 2 and gain ground in the tablet market, other manufacturers will rev up the launches of their own devices. But they could hit an oversupply bubble during the second half of this year, says the analyst.
Apple and its rivals will collectively build around 81 million tablets for 2011, according to projections by J.P. Morgan. But Moskowitz's forecast calls for only 47.9 million tablets to actually ship this year, leaving many companies with a glut of products stuck in their warehouses. Even accounting for a potential 20 percent dip in the estimate of 81 million would still leave 65.1 million tablets looking for buyers. Overall, the analyst believes that supply could outstrip demand by 17.2 million tablets.
"In our view, the technical and form factor improvements of the iPad 2 stand to make it tougher for the first generation of competitive offerings to play catch-up, meaning actual shipments could fall well short of plan," Moskowitz wrote in the report.
Beyond the tablet makers, manufacturers of individual hardware components also stand to lose by building too many parts for vendors eager to secure them in case the tablet market really jumps.
"Based on our research inputs, tablet makers eager to emulate Apple's meteoric start are trying to secure components with inflated build plans," Moskowitz wrote. "There appears to be a concern among makers that certain components will not be available if tablets take off. Of note, glass displays, processors, and, to a lesser extent, NAND Flash are the components that could be most at risk."
Worries about a market oversupply of tablets and components have hurt semiconductor company ARM, which designs chips for the iPad and other devices, according to Bloomberg. Its shares today took their biggest tumble over the past five months based on fears that the stock may be overpriced and that sales of tablets may not meet expectations.
With the iPad 2 about to land in consumers' hands, competing tablet makers are still plotting their next moves.
Samsung, which released its 7-inch Galaxy Tab late last year, is reportedly set to unveil an 8.9-inch model to join the 10-inch tablet it demoed at Mobile World Congress last month. BlackBerry maker Research In Motion is readying its new PlayBook tablet, with some reports saying the device will launch next month. RIM also is planning to release two more tablets before the year is over. And HP has gotten into the act, with its new TouchPad reportedly reaching consumers in April.
Those and many other tablets will join Motorola's new Xoom, which went on sale just two weeks ago.
But Moskowitz believes most of the Apple rivals will face a rough market, especially from consumers who'll be looking for a lot from any iPad rival.
"We have a favorable view of Apple's products and operating model, but given the extraordinary success of the company over the last decade, there are holdouts just as there were with Microsoft before Linux," wrote the analyst. "We think these holdouts will be underwhelmed by the tablet alternatives. Aside from Motorola's Xoom and HP's TouchPad (which does not have a price tag yet), the competitive offerings appear to be light on attraction, in our view."