Where have all the semiconductor drivers gone?

Tablets and smartphones have been key drivers of electronics and semiconductor growth for the last few years. However the growth rates for these devices are slowing as they have become more prevalent. Tablet shipments are expected to reach 229 million units in 2014, according to Gartner, equal to 73% of PC units. IDC projects smartphones will exceed 1.2 billion units in 2014, accounting for about two-thirds of total mobile phones. As show in the chart below, shipments of tablets versus a year ago have slowed to about 11% for the last two quarters from growth in the 90% to 160% range in 2012 and early 2013. Smartphone growth has decelerated from the 40% to 50% range through 2012 and most of 2013 to the 20% to 30% range for the last four quarters.

Despite the slowing growth of tablets and smartphones, new categories of devices are emerging to drive growth. Gartner has identified a segment which it calls ultramobile premium PCs – devices which have the functionality of PCs in lightweight and smaller packages similar to tablets. With 71% growth in 2015, Gartner expects these devices to drive 3.6% growth in total PCs in 2015 despite a 5.6% decline in traditional PCs. Gartner projects the tablet market will grow 19% in 2015. Combining tablets and ultraportable premium PCs results in 32% growth in 2015.

[TABLE] align=”center” border=”1″
|-
| style=”width: 239px” | Annual change in units
| style=”width: 90px” | 2013-14
| style=”width: 78px” | 2014-15
| style=”width: 78px” | CAGR
2014-18
| style=”width: 148px” | Source
|-
| style=”width: 239px” | Traditional PC
| style=”width: 90px” | -6.6%
| style=”width: 78px” | -5.6%
| style=”width: 78px” |
| style=”width: 148px” | Gartner, Oct. 2014
|-
| style=”width: 239px” | Ultramobile Premium PC
| style=”width: 90px” | 75%
| style=”width: 78px” | 71%
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” | Total PC
| style=”width: 90px” | -1.1%
| style=”width: 78px” | 3.6%
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” |
| style=”width: 90px” |
| style=”width: 78px” |
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” | Tablet
| style=”width: 90px” | 10.6%
| style=”width: 78px” | 19.1%
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” | Tablet + Ultramobile Premium PC
| style=”width: 90px” | 23%
| style=”width: 78px” | 32%
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” |
| style=”width: 90px” |
| style=”width: 78px” |
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” | Regular smartphone
| style=”width: 90px” | 12.8%
| style=”width: 78px” |
| style=”width: 78px” | 3.7%
| style=”width: 148px” | IDC, Sep. 2014
|-
| style=”width: 239px” | Phablet
| style=”width: 90px” | 210%
| style=”width: 78px” |
| style=”width: 78px” | 36%
| style=”width: 148px” |
|-
| style=”width: 239px” | Total Smartphone
| style=”width: 90px” | 23.8%
| style=”width: 78px” |
| style=”width: 78px” | 10.1%
| style=”width: 148px” |
|-
| style=”width: 239px” |
| style=”width: 90px” |
| style=”width: 78px” |
| style=”width: 78px” |
| style=”width: 148px” |
|-
| style=”width: 239px” | Tablet
| style=”width: 90px” | 13%
| style=”width: 78px” |
| style=”width: 78px” | 6.8%
| style=”width: 148px” |
|-
| style=”width: 239px” | Tablet + Phablet
| style=”width: 90px” | 55%
| style=”width: 78px” |
| style=”width: 78px” | 22%
| style=”width: 148px” |
|-

IDC has segmented out a high growth product area in smartphones which it calls phablets (combining phone with tablet, although I doubt any self-respecting supplier will use the term for its products). Phablets are smartphones with screens from 5.5 inches to 7.0 inches, thus displacing many of the smaller tablets. IDC forecasts the compound annual growth rate (CAGR) for phablets from 2014 to 2018 will be 36%, driving the total smartphone CAGR to 10.1% despite only a 3.7% CAGR for regular smartphones. IDC projects the CAGR for tablets from 2014 to 2018 will be 6.8%. Combining tablets with phablets drives a CAGR of 22%.

The ultimate winner in the merging of PCs, tablets and smartphones remains to be determined. It is likely that several categories of devices will continue to claim various segments of the market. Most business users will continue to need the full functionality of a PC, but may compromise with an ultramobile to get the portability and flexibility of a tablet. Many young consumers use their smartphones as their primary communication and computing device, but may like the tablet-like functions of a phablet. In many emerging markets, consumers cannot afford multiple devices and will chose the one device which best fits their needs.