January 31, 2011 – Tablet computer use is exploding, and devicemakers and content providers all want to get on this train. Let’s take a look at what tablet demand will do for two key markets: displays and memory.
Apple may have scored a home-run with its iPad and commands near total tablet-market domination, but it’s no longer the sole player. Tablets were the unquestioned headliner at this year’s Consumer Electronics Show (CES) in Las Vegas, where dozens of models were shown or hinted at — a flood of devices, including Motorola’s Xoom (dubbed CES’ Best of Show), RIM’s BlackBerry Playbook, new entrants from Samsung, Dell, H-P, Vizio, Toshiba, Viewsonic, Lenovo, many using the Android OS and a few Windows-based systems. IHS iSuppli sees tablet shipments more than tripling in 2011 to 57.6M, and continuing to climb in forthcoming years. "Not since the dawn of television in the 1950s has another electronic device so effortlessly captured the hearts, minds and discretionary spending of so many consumers," gushes the analyst firm, anointing tablets as no less than "standard equipment for virtually any application, from education and healthcare, to government and the military, to retail sales and, of course, the living room."
|Percentage of tablet PC unit shipments accounted for by iPad and competitors. (Source: IHS iSuppli)|
Components companies trying to wrap their heads around what tablet demand means for them should weigh the following opportunities and challenges:
DRAM. Shipments of DRAM, the main component in tablets, will spike by an eye-popping 834% in 2011 to 353M Gb (vs. 37.8M Gb in 2010), according to IHS iSuppli. The firm projects 1B Gb shipments in 2012, 2.2B in 2013, and 3.5B in 2014.
The challenge: Memory firms are expecting sales to decline 12% this year as ASPs drop, and tablets won’t exactly help. Many tablets seen/hinted at CES use 1GB of mobile DRAM, less than a third of what a typical PC uses; and while most of that is mobile DRAM, some tablets run ARM MPUs with lower-priced commodity DRAM. And the popularity of tablets is cannibalizing netbooks and low-end notebook, which further cuts into memory suppliers’ DRAM business.
|Global forecast of DRAM shipments for tablets. (Source: IHS iSuppli)|
NAND flash. NAND flash should enjoy a banner year in 2011: 18% sales to $18.7B (off 2010’s 38% gains) and 72% spike in bit growth to 19.3B GB. Commodity flash has been the workhorse thanks to use in USB flash drives and microSD memory cards, but embedded applications for NAND are reaching a fever pitch in devices such as mobile handsets (i.e. smartphones) and tablets.
The challenge: Memory makers have a long history of chasing feverish demand with a feverish overbuild, and signs are appearing that NAND makers may be reentering this nasty cycle again. Supply could surge ahead of demand by the end of 2011, due in part to "aggressive technology shrinks" to the 2xnm node, writes Michael Yang, IHS/iSuppli senior analyst for memory and storage. Moreover, embedded apps require "higher performance and reliability checks" (typically 3-6 months to qualify), so suppliers may try to ramp-up more quickly, thus creating a similar scenario as what happened with triple-level cell (TLC) memory last year. "Such a state of affairs could prove destructive, resulting in the significant erosion of average selling prices during the first half of the year and plunging the market into chaos," he writes. In the end, iSuppli projects a slight downturn in 2012 — but modest growth should return in 2013 and 2014.
|Global NAND flash memory revenue forecast. (Source: IHS iSuppli)|
Displays. What’s the first thing you noticed with the iPad? The gorgeous display, most likely. And with competitors rushing to offer their own tablets, look for supply-chain disruptions, both shortages and excess inventories. Apple is the undisputed tablet king with the iPad, but a host of big-name rivals want their own slice of the market. And of course, all of them need equally-compelling displays. Meanwhile, as demand for tablets intensifies, demand for netbook and notebook displays will soften, writes IHS/iSuppli analyst Joe Abelson.
The challenge: Display suppliers will have to gamble their production capacity on the "unrealistically high projections" of all these tablet-PC challengers, not just in terms of units but also taking into account different panel sizes and specs. Look for shortages and excesses at the SKU level through 2011, possibly with heavy discounting or even scrapping of unused displays, Abelson says.