iPad Demand is Falling

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The iPad is currently the market leader in the tablet industry. Apple enjoys as much as 80% share, but this might change soon as demand for the iPad falls. What can Apple do to keep the iPad 2 desirable among tablet buyers?

Goldman Sachs has issued a report on Apple, and say the company might be facing some trouble in the tablet market, which is has dominated since the launch of the original iPad in 2010. Analyst Bill Shope says the iPad is still going to be among Apple’s best-sellers, but the product line’s growth might stall due to some market conditions.

While improving holiday demand into late November could certainly push the momentum in the other direction, we believe it is prudent to assume the iPad is facing some near-term demand challenges.

In fairness to Apple, the iPad saw tremendous sales and growth rates since it was introduced. Back then, tablets were not really new, and various brands have had their own tablet computers — mostly running a touchscreen-adapted variant of Windows. However, Apple revolutionized this market by introducing a touchscreen-optimized tablet running its iOS, which had then already been popularized by the iPhone and iPod Touch.

Shope says the iPad may be due for a price cut, which Apple’s other product lines already underwent. Apple may also have to introduce more features to make the iPad more relevant in an ever-changing market. He says that “price cutes have also been critical, and the iPad is overdue.” The iPad 2 is still considered the gold standard in tablet computing, and competitors from other major platforms like Android are only a minority. But the $199 Amazon Kindle Fire is reportedly poised to outsell the iPad 2 this holiday season, even if it offers lower specs and less functionality than the iPad. But at the $199 price point, and the ability to connect to Amazon’s product, ebook and content ecosystem, consumers may have now found a worthy challenger to the $499 iPad.

Should Apple be worried? Goldman Sachs is still maintaining iPad sales estimates for 4Q 2011, and is also optimistic with iPhone 4S sales (at 30.3 million). But Apple will have to take competition as a serious threat, especially since the company’s growth is expected to be driven by both the iPhone and the iPad.