iPad 2 and Upgraded Tablets Will Accelerate Sales

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Tablet sales in the U.S. are expected to double to 24.1 million units this year, according to Sarah Rotman Epps, an analyst at Forrester Research. In a blog post today, Epps revised initial tablet forecasts upward and noted that Apple’s iPad will face plenty of competition. Epps said the more than doubling of tablet sales (from 10.3 million tablets sold in 2010) is expected because these are “lifestyle devices” and therefore face a significantly faster refresh cycle like that of smartphones and MP3 players.

Indeed, Epps’s upward sales revision isn’t surprising, nor is the outlook for tablets not named iPad. This week’s Consumer Electronics Show is bound to deliver dozens of new tablet devices, most of which will run on Google’s Android platform. The newest tablets are expected to run Honeycomb, a version of Android specifically for larger devices, but I wouldn’t expect many of these to be on sale for at least a month or two after CES: Google hasn’t yet launched Honeycomb, so it will take time for manufacturers to get the final software on new devices. And recent reports from PC Magazine indicate that Google’s newest Android version may require improved hardware, such as dual-core processors, which are only just now starting to appear in handsets.

A faster refresh cycle driving more tablet sales makes sense for several reasons. Most tablets available today or coming soon have smartphone guts: energy-efficient processors and integrated cellular connectivity. One look at the handset market over the past year shows numerous models, some with just a few bland tweaks from prior versions. This approach hould trickle over to the tablet market as manufacturers target devices to fit every lifestyle and price-point, even as incremental hardware improvements appear throughout the year.

Apple is already on a yearly refresh cycle with its other iOS devices, the iPhone and iPod touch, and it’s likely to do the same with the next iPad to help fend off Android tablets. With more consumers upgrading, sales will rise faster than the number of U.S. consumers using tablets: Epps predicts that one-third of U.S. consumers will own a tablet by 2015.

While there are Wi-Fi only tablets, many use 3G networks for connectivity, and here in the U.S. that typically means a one or two year contract, just like for phones. As a result, consumers are apt to upgrade to the latest and greatest tablet near the end of a contract, much as they do for handsets. That’s very different from the personal computer market, where it’s not uncommon to use the same machine for three or more years.

With such an expected jump in tablet sales, what happens to netbooks, which at a lower cost than traditional notebook computers, might also be upgraded more often? Epps figures tablets sales will eclipse those of netbooks by 2015, and I concur: the technology used in netbooks isn’t advancing as quickly as that of tablets and smartphones. Barring a disruptive change to the netbook market, these devices are likely to continue eating more into laptop sales than tablet sales.

With the rapid advances in mobile technology, such as faster broadband networks and dual-core processors, there’s simply more incentive to upgrade a tablet in a shorter time period, provided consumers don’t cancel a cellular contract to do so. How long do you expect your tablet to last: six months, a year, two years, or perhaps longer?

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