Tablet dollars: Android passed Apple for first time in Q3
Apple's iPad now trails Android in both units shipped AND revenues, says Morgan Stanley. — FORTUNE — Apple (AAPL) investors have long taken comfort in the fact that even if its share of tablet shipments fell behind Android's …
Context & Ripple Effects
The unit-share story has been running since 2011, when Android took 20 points of tablet share from the iPad and researchers first flagged Android tablets gaining ground in quarterly shipments (Bloomberg, early 2011). What Apple investors could still point to was revenue: even as Strategy Analytics showed Apple holding over 68% of a growing market as recently as mid-2012 (24.9M tablets sold in Q2 2012), the iPad kept capturing most of the money.
That comfort is what Morgan Stanley's new estimate removes — for the first time, Android led in dollars as well as units in Q3 2013. The shift had been telegraphed on the demand side: OPA found iOS and Android already level in U.S. tablet penetration by mid-2012 (with 47% penetration projected by 2013), while the iPad's enterprise dominance (trouncing Android in enterprise back in 2011) was never enough to offset low-priced Android volume.
First-order effects
- Apple loses its core investor argument — that falling shipment share was fine because the iPad still took most tablet revenue — forcing analysts to reprice AAPL around volume leadership rather than profit capture.
- Google and Android OEMs gain proof their low-price strategy converts to dollars, strengthening their case with carriers, retailers, and component partners heading into the holiday quarter.
Second-order effects
- Apple's pricing response is already visible: the Retina iPad mini launched November 12 at $399, reviewers calling it the best small tablet yet, signaling Apple will defend share on price rather than concede the sub-$500 tier.
- App developers face a sharper calculus — with US tablet audiences already split evenly per OPA's data, revenue-per-user gaps become the last justification for an iOS-first tablet strategy, pressuring toolmakers and publishers to fund parallel Android builds.
Third-order effects
- If cheap Android hardware keeps winning dollars, tablets complete the PC-market pattern of premium vendor versus commodity majority, shifting ecosystem power toward whoever controls software distribution on the volume side — Google — and squeezing Apple's services attach rates.
- Sustained Android dollar leadership would push component makers and contract manufacturers to optimize lines around high-volume, thin-margin tablet builds, entrenching the supply chain that made sub-$400 devices possible.
The trend: Tablets are tracking the smartphone playbook, where Android's unit dominance eventually converts into revenue dominance and premium-vendor margins survive only at the top of the market.