India Tablets Market Report - By Convergence Catalyst


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The report looks at global trends, applications and use cases for tablets, the current state of market, challenges and the outlook for the Indian tablet market supported by key insights, data points and analysis. It also highlights the potential and opportunity in India which could serve as a strategic tool for category players.

This report is available for free download at our website - www (dot) convergencecatalyst (dot) com

India Tablets Market Report - By Convergence Catalyst

  1. 1. Tablet Ecosystem in India – 
Current State, Potential and Outlook November 9, 2011 Jayanth Kolla & Vijay Ramanathan
  2. 2. PrefaceAs a concept, tablets have been around for a while. So have touch screens on phones. It did take quite a while for atrue convergence of hardware, software, operating systems, usability and an application ecosystem to finally cometogether (read as iPad) which has paved the way for a new generation of devices in the form of today’s tablets! As this nascent market grows at a breakneck pace globally, economies of scale have started setting in already. While anumber of models are available in India from global brands and not so global ones there has been very little by way ofdifferentiation amidst all these products. While tablet adoption has largely been with consumers, uses for this devicein certain verticals such as education, retail, healthcare, corporates & aviation industries prove there is a largepotential for those verticals. Why do a report on the Tablet Market for India? Tablets have the potential to grow exponentially if key players inthe Indian market can play to the right market forces. However, India is a complex market made more challengingwith a lack of structured, actionable data (the insights and analysis needed for business leaders). Hence this report.What to expect from this report? This report will not only look at global trends, applications and use cases fortablets but also the current state of Indian market, challenges and the outlook for the Indian tablet market. Thisreport will highlight the potential and opportunity in India which should serve as a strategic tool for category players.The authors have reached out and interviewed business heads, product, marketing and sales managers, distributorsand retailers of leading global and local tablet OEMs and also some neutral parties such as technology journalists,bloggers and reviewers. The authors wish to thank all the individuals who provided input for this report.Who is Convergence Catalyst & how are they qualified? Convergence Catalyst is a young and nimble TelecomResearch and Advisory firm focusing on the Indian market. Convergence Catalyst (CC) principals bring decades ofrelevant Telecom experience in the Indian Telecom Industry. Having been Technocrats, Product Marketeers, Analystsand Business Consultants, they bring a keen insights into the Indian market dynamics. These insights will reflect onthis report to help industry players base their strategic, operational decisions on the emerging Tablet Market.
  3. 3. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 3
  4. 4. Tablets have become popular consumer devices with the launch ofApple iPad in Q1 2010, followed by a number of models by other OEMs1 Timelines of Key Tablets Launched Globally Samsung Motorola HP Slate Blackberry Apple iPad Galaxy Tab Xoom on Web OS Playbook Apr ‘10 Sep ‘10 Jan ‘11 Feb‘11 Apr‘11•  Although tablets as portable, basic connectivity and computing devices have existed for many years, launch of Apple iPad heralded a new device segment•  iPad launch was followed by a number of tablet launches such as Samsung Galaxy Tab and Motorola Xoom on Android, HP’s slate on WebOS and Blackberry’s Playbook on the QNX platform•  Although HP has recently announced the cancellation of Slate and WebOS development, the company is rethinking its strategy 4 Sources: CC Estimates, Industry inputs Note 1: OEM – Original Equipment Manufacturer
  5. 5. Tablet sales are expected to grow over four times in 2011, with majorityof sales coming from North America and Europe regions Total Global Tablets Sales by Year (in Mn) Worldwide Tablets Sales split by region (2011) 70 40% 100% 36% 16 22% 2% 2010 2011E Total Tablets North Rest of the Europe Asia Sales America World •  Globally, over 16 million have been sold in 2010, and the number is expected to grow approximately by 350% to 70 million by the end of 2011 •  Currently, tablets are being sold in developed markets on North America and Europe, while Asia (especially, China) is soon catching up •  With global (adult) internet penetration expected to reach over 21% by 2014, tablets will help drive the internet adoption among the unconnected, especially in the emerging markets 5 Sources: CC Analysis, Morgan Stanley – Tablet Demand and Destruction Report – Feb 2011
  6. 6. Apple’s iOS leads the market with two-thirds share followed by Android •  Apple iOS leads the tablets operating Tablets Operating Systems Market Share system market with two-thirds share (Q3, 2011) •  Android’s share has increased from 2.3% in Q3, 2010 to close to 27% in Q3, 2011 •  Android is the platform of choice by many OEMs (outside of Apple) 66.6% •  As the tablet adoption increases in 100% emerging markets, the share of Android is also expected to increase in the next few 26.9% 2.4% 1.2% quarters 2.9%Total Tablets iOS Android Windows QNX Others •  Among all the Android-based tablet Sales OEMs, Samsung leads the market with approximately three million shipments in Q3, 2011 6 Sources: CC Analysis; Strategy Analytics – Global Tablet Shipments, Q3 2011 – Oct 2011; Nomura – Open Mobile Summit Report – Jun 2011
  7. 7. The apps (available on each platform’s app store) play a key role in thetablets ecosystem Number of Active Applications by Operating Top Categories of Apple App Store Apps (‘000) System App Store1 (‘000, Sep 2011)Apple App Android Blackberry Windows Games Books Entertainment Education Lifestyle Store Market App World Market Place•  Apps form a critical part of tablets usability and experience as they continue to provide new feature sets and a whole new dimension to postponability•  While Apple App Store has over 100K iPad optimized apps, the number of apps developed for tablets on Android 3.x (Honeycomb) and other platforms are abysmally low•  While many of the existing Android smartphone apps do run on tablets, the platform SDK’s2 do not automatically scale the fonts and graphics for the bigger tablet displays, thus providing poor user experience 7 Sources: CC Analysis; Industry inputs Note 1: Includes both smartphone and tablet apps, 2: SDK – Software Development Kit
  8. 8. Along with web browsing and email, media consumption (consumers)and presentations (enterprise customers) are the key tablet applications Percentage of Users Who Use Tablets Enterprise Customers iPad Usage for Regularly for Consuming Content Different Activities 68% 73% 69% 67% 62% 54% 54% 52% 52% 51% 46% 45% 38%•  Tablets are primarily being adopted for consuming content, with accessing internet and checking emails being the predominant activities both by retail and corporate consumers•  While retail consumers also use tablets predominantly for multimedia consumption and gaming, enterprise consumers leverage the portability and the mobility of the device for remote access and client presentations•  Lack of end-user file management system and ergonomic design for prolonged creation of spreadsheets and presentations does not yet make the tablet conducive for replacing PCs in enterprises 8 Sources: CC Analysis; AlphaWise; Morgan Stanley – Tablet Demand and Destruction Report – Feb 2011
  9. 9. Tablets can also be adopted as primary devices in various industry verticals for diverse uses and applications Various Tablet Use Cases for Different Industry Verticals Healthcare Education Aviation RetailTypical use cases of tablets in Typical use cases of tablets Typical use cases of tablets Typical use cases of tabletsthe Healthcare industry include: in the Education industry in the Aviation industry in the Retail industry•  Electronic Medical Records include: include: include:•  Speech Therapy •  Digitized Textbooks •  Flight Charts •  Point of Sale Terminals•  Digital Imaging •  Annotate Notes & •  Access to Terminal •  Customization Textbooks Approach & Procedures •  Sales Assistant•  Patient Education Charts •  Interactive apps for•  Sign out •  E-Commerce education •  Airport/Facility Directory•  Billing •  Digital Signages •  Note Taking •  Weather Briefing •  Online Catalogs •  Streaming of educational •  Altitude Charts content•  Healthcare industry in the West •  Universities and Schools •  The FAA has allowed the use •  While online catalogs will (especially the US) has exploited adopting Tablets in a big way of iPad for electronic flight aid sales, Retailers are technology for a long time in the US for a variety of uses charts. Big airlines such as slowly turning to tablets United and Alaskan Airlines to enhance the in-store•  Commercial Consumer tablets are have replaced their Flight purchase experience for coming in as cheaper alternatives Manuals with digitzed copies the consumer and as supplemental devices on the iPad 9 Sources: CC Analysis
  10. 10. While some industries are still in the pilot mode, education industryacross the world has gone ahead to adopt tablets full time Large Scale Tablets Deployment Across the World – Share by Industry Vertical (July 2011) 64.6% 100% 10% 7.3% 17.8% Total Tablet Usage Education Public Services Healthcare Others •  While many industries are testing/piloting tablets as a potential replacement for their current devices, education sector across the world has already started deploying these devices •  Various universities and colleges are providing tablets to faculty and students (sometimes as loaner devices for the duration of the course) for downloading digital textbooks, podcasts, assignments, etc •  Various government departments such as Bureau of Land Management, City Councils, Police Force, Geological Survey Dept, etc in US & UK are using tablets for documentation, instant database access, and as a part of their paper reduction initiatives 10 Sources: CC Analysis; iPad Pilots – K12 Learning
  11. 11. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Tablet Projections in India Something to Think About… Convergence Catalyst Credentials 11
  12. 12. The tablets supply side value chain includes both hardware & software providers along with consumer interface such as carriers/retail channel Chipset & Other Operating Device Carriers Component System Integrator Makers/ Providers Providers OEMs Retail Channel•  Chipset vendors •  Operating System (OS) •  Hardware and •  Device makers •  Carriers provide the develop various providers not only software integrators develop and launch requisite 2.5G/3G/ processors used in develop the OS for help enable finished tablets in various 4G connectivity for tablets such as CPU, devices, but they also products for OEMs global markets tablets to be used GPU, RF processor, etc enable third party either in partnership on the go. In some application developers with carriers and/or cases, carriers•  Other key hardware to develop apps and through retail partner with OEMs components such as help grow the channel to launch tablets Touchscreen Display, ecosystem bundled with their Memory, Battery, etc services are provided by various •  While companies such component makers as Apple & Blackberry •  Retail distribution develop the OS for channel plays a key their own products, role in tablets sales Google & Microsoft and Go-To-Market partner with tablet strategy of OEMs OEMs to license OSs 12 Source: CC Analysis
  13. 13. Of all the global tablet ecosystem players, Apple has managed tointegrate most elements of the value chain Player Role in the Value Chain Analysis •  Apple has managed to integrate most elements of the tablets value chain and provide end-to-end value proposition Apple •  It is accredited with creating the tablets category, enabling the paradigm shift to multi-touch and establishing prices for the segment •  Samsung is a key player in the ecosystem. It provides critical Samsung hardware components such as displays, memory, etc and also manufactures its own tablets under the sub-brand “Galaxy” •  Leading Android development and making it accessible to all OEMs and app developers, Google has opened up the tablet Google ecosystem for a myriad of ecosystem players •  With acquisition of Motorola Mobility, Google has in-house hardware capabilities for potentially building a device of its own •  With very few Windows 7 based tablets launched in the market and with it’s tablet-optimized operating system (Windows 8) yet to be commercially released, Microsoft is a late entrant into the Microsoft tablet ecosystem (not counting tablet PCs) •  However, partnering with over 55% of Android vendors gaining royalty for Android use, Microsoft is ensuring revenues from increased use of Android OS Design •  The design houses and hardware manufacturers in Shenzen Houses in (China) and Taiwan are enabling the OEMs to acquire and China & market readily available devices, thus driving the low and mid Taiwan end tablet penetration in emerging markets 13 Sources: CC Analysis
  14. 14. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 14
  15. 15. Tablets offer multiple services and experiences (which were earlier delivered on multiple platforms) on a single device KeyServices Music Video Gaming Books LBS Email Social Networking Yellow Browse IM - Chat Listen Manage View Direct Reading Pages Directions Use Play Cases Stay in Touch Rip Buy Broadcast Guide Create Gamble Navigate MapsCurrentDeliveryPlatform 15 Sources: CC Analysis
  16. 16. Intuitive user interface, portability and instant access to digital contentmakes Tablet an ideal consumption device User ExperienceMultifunctionality Connectivity InteractionEbooks Connectivity SensoryMultimedia -  2G, 3G, 4G InterfaceKey Functions -  WiFi Accelerometer- Browse -  Bluetooth Gyrometer- Email Flip to turn- Office Pinch to Zoom Leading to Excitement, Delight Contextual Usage Relevance Hygiene TouchPush Notifications IntuitiveLocation Aware App Ecosystem Long Battery New Biz Models Portable App for everything Instant ON Developer friendly Global Reach Leading to Satisfaction, Comfort App 16 Sources: CC Analysis Ecosystem
  17. 17. Primarily being a consumption device, Tablet will co-exist with bothmobile phones and computers Primary Communication Device Basic Voice Communications to sophisticated Smartphones Highly Portable, highly capable, but still short on Display sizes Primary Computing/Creation Device Basic creation to sophisticated computing Highly capable but, primary interface is a keyboard for creating Primary Consumption Device Basic creation to heavy duty consumption Highly portable, excellent via media for everyday tasks due to touch interface, instant on, long battery life. Work + Entertainment for all situations 17 Sources: CC Analysis
  18. 18. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 18
  19. 19. In India, Tablets were introduced in Oct 2010 with the launch ofSamsung Tab and Olive Pad Timelines of Key Tablets Launched in India Samsung Olive Pad Apple Apple Galaxy Tab iPad 1 iPad 2 Reliance 3G Tab VT100 Oct‘10 Jan ‘11 May‘11 Aug‘11•  Tablets were introduced in the Indian market in October, 2010 with the launch of Samsung Galaxy Tab (7-inch) and Olive Pad VT100, both Android-based devices•  Although Apple launched iPad 1 in India in January 2011, it could not garner significant sales as iPad 2 was announced globally around the same time•  Reliance 3G Tab is the first tablet launched by a telecom carrier (Reliance), bundled with 3G services 19 Sources: CC Analysis; Industry Inputs
  20. 20. Until the launch of Apple’s iPad 2 in May 2011, Samsung Galaxy Tab wasthe leading tablet sold in India Indian Tablets Market Share of OEMs Indian Tablets Market Share of OEMs (Oct’10 to Apr’11) (May’11 to Sep’11) 100% 10% 100% 55% - 60% 82% 25% - 30% 15% - 20% 6% 2%Total Tablet Others Total Tablet Others1 Apple Samsung Olive Apple Samsung Sales Sales Note 1: Others include Olive, Reliance, Spice, Beetel, Blackberry, HTC, Motorola, Acer, etc•  For the first two quarters of tablets availability in India, Samsung Galaxy Tab dominated the market•  With the launch of their globally successful iPad 2 at the end of April, and with decreased price of iPad 1 by various retail chains, Apple has managed to lead the market since May 2011, catering to early adopters in India•  As per our estimates, the tablets market has also grown by 60% to 80% between May and Oct 2011, (post the iPad 2 launch) as compared to Oct ‘10 to Apr ‘11 due to increased distribution and consumer awareness 20 Sources: CC Estimates; Voice & Data; Industry inputs
  21. 21. Apart from leading global brands such as Apple and Samsung, a number of local Indian brands have also launched tablets in India Samsung Galaxy Tab –Apple iPad 1 & 2 Dell Streak Motorola Xoom 7”, 8.9”, 10.1” Asus EEE Pad Creative ZINIO 7, Black Elemente iBall Slide Transformer 10 701, 707, 708 Devices Announced, Yet to be Launched HTC Flyer Acer Iconia Viewsonic Viewpad Olivepad VT100 Datawind Ubislate or the Govt. driven Akash 7”, 10” Program Milagrow Reliance Tab HCL Me X1, AE7- Mercury MTab TabTop A1, AP-10 A1 Huawei S7 Binatone SmartTab Spice MI-720 Sony S1 Sony S2 Beetel Magiq MSI Windpad Infibeam Phi Blackberry 7”, 10” Playbook Lenovo Ideapad – 3 Fly Vision versions NotionInk Adam Cisco Cius Amazon Kindle Fire Asus EEE Pad Toshiba Thrive Slider 21 Sources: CC Analysis
  22. 22. With Android being the choice of operating system by most of the OEMs outside of Apple in India Number of Tablet Models Launched in India Operating System Wise Share of Total Tablets Split by Operating System (Oct’11) Sold in India (Oct’10 to Sep’11) 36 26 100% 55% - 60% 38% - 42% 4 3 2 1 3% - 5%Total Tablet Android Android Total Tablet Others1 Android iOS Windows iOS QNX Sales Launched 2.x 3.x Note 1: Others include Blackberry QNX and Windows 7 •  Of over 35 tablets launched in India so far, majority of them are on Android operating system •  Of all the Android based tablets, Samsung Galaxy Tab is the highest selling device •  Although there were only two models of iPads launched in India, six different versions of each model (combination of Wi-Fi, 3G and memory size) offer choice to consumers at different price points and features •  Apple managed to garner significant share with iPad 1 & 2 despite the high number of Android tablets availability in India 22 Sources: CC Estimates; Industry Inputs
  23. 23. Operating Systems play a key role in delivering the experience for tablets Features Apple iOS5 Android 4.0 Microsoft WP 7.5 Blackberry QNX Kernel •  OS X •  Linux •  Windows CE 7 •  QNX Neutrino •  GSM, CDMA, 3G, RF Connectivity •  GSM, CDMA, 3G •  GSM, CDMA, 3G •  3G, 4G 4G Multitasking •  Yes •  Yes •  Yes •  Yes Social Media •  Facebook, Twitter, •  Twitter •  Facebook, Twitter Integration LinkedIn, Win Live •  iTunes – Music, •  Windows Market •  Blackberry App App Store Videos, Games, •  Android Market Place World Books Browser •  Safari •  Chrome based •  IE 9 •  Yes Flash Support •  No •  Yes •  No •  Yes •  Icons + Widgets Home Screen •  Icon Centric •  Icons + Widgets •  Icons (Live Tiles) Productivity •  iWork •  Google Docs •  Office Mobile •  Docs To Go Voice Recognition •  Yes •  Yes •  Yes •  No Voice Assistant •  Siri •  No •  No •  No WiFi Syncing •  Yes •  With 3rd party apps •  Yes •  Yes. Manual Sync. Over the Air •  Yes •  Yes •  No •  Yes Updates Cloud Support •  iCloud •  Google Sync •  Sky Drive •  Limited (after •  Deep Customization •  None •  Limited Jailbreaking) Customization Wireless Cloud •  Yes, 5Gb Free •  No •  No •  No Backup 23 Sources: CC Analysis; Industry Inputs
  24. 24. Too many Android versions have lead to fragmentation 2005 Apr 2009 Sep 2009 Feb 2010 Android Donut – 1.6 Android Éclair – 2.1 Android Cupcake – 1.5 Support for multiple accounts & email Animated Window Transitions New way to Search Bookmarks, Web History, contacts & Web from Home in a combined Inbox Accelerometer Exchange Support Improved Web Browser Screen Unified Video & Photos in Gallery App Ability to search through SMS & MMS New Virtual Keyboard Camera Upgrades Integrated Voice Search Select Multiple Photos for Deletion See what apps are draining battery Built-in Adobe Flash Support Home Screen Widgets Digital Camera Zoom Live Folders Camera Speed Boodt (Google claims up to 39%) Scene modes, White Balance Controls Color effects, Macro Focus Mode Makeover to Virtual Keyboard for faster typing May 2010 Dec 2010 May 2011 Android Froyo – 2.2 Android Gingerbread – 2.3New Homescreen to configure Designed for making Android simpler,Shortcuts & Widgets faster & easier Android Honeycomb – 3.x Built specifically for tabletsNew Applications Launcher & Browser UI placed colorful elements on black Overhaul to the OS with a 3D ‘esque path towardsImproved Security with option to set background multitasking, Notifications, home screen customization &PIN or password On screen keyboard overhauled for widgets System bar is a constant fixtureCalendar support to Exchange improving typing accuracy Action bar changes depending on which app is beingCalendars One touch selection with Copy & Paste usedCamera App added on-screen buttons Improved Power Management with ability Easy to switch between appsfor Zoom, flash, white balance, geo- to monitor & close active apps Redesigned onscreen keyboard Browser, camera, gallery, contacts & email appstaggings, focus & exposure Camera app support for multiple cameras redesigned for big screenCamcorder got LED Flash support Open Accessory FeatureOverall Speed boost Performance Tweaks to Animation Framework Resize Home Screen Widgets 24 Sources: CC Estimates, Industry inputs,
  25. 25. Apart from OS, specific hardware features such as external memory, longbattery life & USB support are also key for success of tablets in India Key Features to be Considered for Launching Tablets in India Feature Description and Analysis Significance •  Extendable memory support is key for Indian consumers •  Many mass market consumers in India get their Extendable multimedia content and apps loaded on to the memory Memory Support card by the retailers for consumption on their devices and share the content with others by exchanging their memory cards •  Some of the low & mid tier tablets with Wi-Fi only connectivity enable users to plug in USB based data modems for 3G connectivity. This and the ability to connect other peripherals through the USB port is highly USB Support desired by the Indian consumers •  Some retailers also position the USB port as easy to use drag-and-drop content transfer mechanism. This is favored by consumers who do not want to deal with specialized software such as iTunes for content transfer •  Long battery life is a key hygiene factor for all devices in India •  Mass market consumers in India expect their device Long Battery Life battery to last at least one full work day •  Consumption of multimedia on portable devices is extremely high in India and also, sub-optimal networks (3G & Wi-Fi) tend to drain the device power rapidly Extremely Important Highly Important Important Less Important Insignificant 25 Sources: CC Analysis; Industry Inputs
  26. 26. Of all the retail channels that are currently selling tablets, Large FormatRetail stores sell the most Current Tablets Sales in India Split by Type of Retail Channel (Sept 2011) 100% 60% - 65% 10% - 15% 15% - 20% 5% - 8% 1% - 2% Total Tablets Sales Large Format Retail Concept Stores IT Channel Telecom - Telecom - Multi Orgnanized Channel Brand Outlets •  Tablets sales in Large Format Retail stores such as Croma & Reliance Digital is high as they provide wide range of devices on display, good device as well as retail experience and have well trained staff •  Some OEMs are confused whether to position the tablet as an IT product or a telecom product. They are distributing 7-inch versions in the telecom channel and the 10-inch version in IT channel •  Telecom organized channel chains such as Univercell, The Mobile Store, etc who have recently started selling tablets are struggling with sales, as they are unable to provide the necessary retail experience or educate the customers •  IT Channel, which is more adept at solution-selling is able to educate the consumers on the value proposition of tablets and are currently faring better than telecom channels for tablet sales 26 Sources: CC Estimates; Industry Inputs
  27. 27. The current tablet buyers (early adopters) in India consider device OS,price, brand and the high level features for purchasePurchase Decision Making Process for the Current Tablet Buyers (Early Adopters) in India Apple iPad Wi-Fi Only Wi-Fi + 3G iPad or Or Other Wi-Fi + 3G Tablets Wi-Fi Only Others Purchase one of the Purchase one of the Wi-Fi Only iPads Wi-Fi+3G iPads Evaluate key parameters Key evaluation criteria for non-iPad models include: (Price, Brand & Features) •  Price −  Low End – Sub USD1 250 −  Mid End – Between USD 250 and USD 500 −  High End – Over USD 500 •  Brand – Samsung, Motorola, Acer, etc Evaluate secondary •  Key product features parameters (Product −  Display Size – 7” or >7” Hygiene) −  Operating System – Android 2.x vs 3.x or other −  Extendable memory support −  Onboard memory size •  Hygiene features such as long battery life, USB Purchase appropriate support, multiple multimedia formats support, model type of inbox accessories, etc 27 Sources: CC Analysis; Industry Inputs Note1: 1 US Dollar = 50 Indian Rupees
  28. 28. The devices in India can be broadly classified into three differentcategories based on their features and price point Segmentation of Tablets Currently Being Sold in India Based on Price Segmentation Price Range Key Features •  7 inch, 800 x 400 px, capacitive display (some OEMs use resistive displays for ultra-low end tablets) •  Smartphone operating system (Android 2.x) Low Tier •  Up to USD 250 •  Processor – Typically less than 1GHz •  Memory – 256MB RAM. Internal memory of 8GB or less, with extendable memory support •  Connectivity – Typically Wi-Fi Only •  7 inch or higher capacitive display •  Smartphone operating system (Android 2.x) Mid Tier •  Processor –1GHz •  USD 250 to USD 500 •  Memory – 256 or 512MB RAM. Internal memory of 8GB or less, with extendable memory support •  Connectivity – Typically Wi-Fi & 3G (in some cases) •  Typically over 7 inch, multi-touch capacitive displays •  Tablet optimized operating systems – Android 3.x, High Tier Apple iOS, Blackberry QNX, etc •  Over USD 500 •  1GHz or higher, multi-core processors •  Memory – 512MB or 1GB RAM. Internal memory of 16GB or higher •  Connectivity – Wi-Fi and 3G 28 Sources: CC Analysis; Industry Inputs
  29. 29. Different segments of consumers have different primary uses of tabletsranging from portability and remote access to multimedia consumption Various Indian Consumer Segments and Their Primary Tablet Use Cases Consumer Definition Key Tablet Use Cases Description Segment •  Portability •  Corporate professionals use tablets •  Professionals spend •  Connectivity on the move extensively as it provides most of the day in •  E-mail & internet access portability and the bigger display Corporate offices (as compared to smartphones) is Professionals •  Client presentations •  Connectivity is high conducive for extensive web priority •  E-book reader browsing, remote e-mail access •  Writing & annotation and reading •  Applications •  Connectivity on the move •  Technology savvy early adopters Tech Savvy/ •  Own latest device explore the latest applications and •  E-mail & internet access Gadget Crazy •  Early adopters games and are always-on the •  Multimedia internet while on the move •  Gaming •  Applications •  High end youth and prosumers •  Aspirational Category •  E-mail & internet access moderately use tablets for variousHigh End Youth •  May go beyond their applications and services •  Multimediaand Prosumers means to own better gadgets •  E-book reader •  Their primary goal is to cater to the •  Gaming aspirational value of the device •  Multimedia on the go •  Mass market consumers in India •  May not be connected are expected to use the tablets Mass Market to Internet but own a •  Basic internet and e-mail primarily for multimedia communication device access consumption 29 Sources: CC Analysis
  30. 30. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 30
  31. 31. Apart from retail, tablets targeted at specialized verticals such as education sector & enterprise users are also being launched in India Aakash (Ubislate) – USD 35 Tablet for Students Cius (Cisco) – Tablet for Enterprise Customers•  Aakash is an Android tablet jointly developed by the •  Cisco has launched a 7” Tablet, Cius at USD 700 London-based OEM, DataWind with the Indian Institute targeted for enterprise customers of Technology and manufactured by the India-based •  Cius is the first tablet based on Intel’s Moorestown company Quad family of processors and is also compatible with a•  The seven-inch touch screen tablet features 256 MB docking station RAM, uses an ARM 11 processor with the Android 2.2 •  Cius is based on Android 2.2 and includes various OS, has two USB ports and delivers HD-quality video. Cisco’s enterprise communication apps such as Aakash has access to Getjar app store instead of −  Unified Box (Phone, Chat, Email, Calendar, and Contacts Android Market in a single app)•  The device will be sold to the Government of India at −  TelePresence video conferencing system and $50 and will be distributed to the students at a −  WebEx web-conferencing app subsidized price of $35 •  Access to Cisco’s AppHQ along with Android•  The Aakash is designed to support various document, Marketplace will enable companies access secure image, audio & video formats mobile business-differentiated applications•  The success will however depend on how well the •  Tablets offering higher security and enabling device is built and its usability customized apps are preferred by enterprises over retail consumer devices 31 Sources: CC Analysis
  32. 32. Educational institutes in India are also considering to deploy tablets Case Study: Profile of a South Indian Engineering College considering tablets deploymentProcess Flow for Classroom Notes Distribution and Consumption on Tablets by Students •  Number of Courses Offered – 39 •  Number of Students – Over 9,000 Central Server •  Number of Faculty – Over 1,100 Wi-Fi Router •  Campus already enabled with Wi-Fi network Digitized Board 2 •  Objective: : Digitization of all key study 1 elements −  Textbooks −  Daily notes distributed through a campus wide 4 Wi-Fi Network 3: −  Automate class room attendance 5 •  Authenticate •  Store and •  Solution: disseminate −  Deploy tablets to all students, enabling portability digitized and mobility content −  Disseminate digitized textbooks and daily updates •  Read of class notes to the tablet •  Annotate •  Consume −  Deploy a location-based solution for automated attendance marking in the classroom Students With •  Currently in discussion with various tablet Tablets OEMs and solution providers/system integrators to source a complete solution 32
  33. 33. Telecom carriers, looking for higher data-based ARPUs have startedlaunching tablets bundled with their 3G services Reliance Tab Proposition and Offerings Key Device Features: •  Android 2.3 OS (Gingerbread) •  7 inch Multi-touch Screen (480*800 pixels) •  9 hours of talk time & 300 hours of standby time •  Extendable memory support •  Dual Camera (2 MP - Rear & VGA - Front ) •  Fully featured mobile phone with FM radio •  Wi Fi Hotspot + Bluetooth and Live TV Tariff Plans Prepaid & Postpaid Free Data Usage/Month 1GB 2GB 5GB Advance Annual Rental (USD) 90 110 140 Device Cost – USD 260 Discounted Monthly Rental (USD) NA 12 16•  Reliance has started offering a mid-tier tablet bundled with its 3G services. It procures the device from ZTE•  The minimum cost of ownership for the consumer is USD 350 (device cost + 3G, annual 1GB plan)•  As per Convergence Catalyst estimates, Reliance has managed to sell 10K to 12K devices in the first 10 weeks of its launch (as of end Oct’11), with majority of sales from Reliance’s existing enterprise customer base•  For new carriers such as Reliance, who have relatively uncongested 2G networks and are looking to attract high ARPU subscribers on their 3G networks, tablet-bundled 3G services are a good option 33 Sources: CC Analysis; Industry Inputs
  34. 34. Going forward, with launch of 4G services in India, carriers couldpotentially launch their services bundled with LTE enabled tablets Key Milestones for LTE Services Launch in India •  Invitation to vendors for •  Awarding network •  Launch of commercial appraisal on requirements contracts services Jan ‘11 Apr ‘11 Jun ‘11 Sep ‘11 Dec ‘11 Apr ‘12 •  Technology evaluation •  Test network setup & •  RFP & vendor evaluation & standards definition ongoing network rollout •  Going forward, as the LTE service are launched in India, Convergence Catalyst expects the carriers to offer LTE enabled tablets, bundled with services •  The carriers can leverage higher data speeds of LTE technology to offer better connectivity and optimized user experience to the consumers •  Although, currently the cost of LTE enabled tablets is high, pan-India LTE carriers such as Reliance-Infotel can help drive the scale and decrease in devices cost •  Reliance-Infotel is reported to be in discussion with content providers such as Walt Disney, Extramarks Edu, etc and tablet ODMs from Taiwan to source both content and devices and sell them at subsidized prices, bundled with TD-LTE services 34 Sources: CC Analysis; Industry Inputs
  35. 35. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 35
  36. 36. A combination of Affordability, User Experience, Aspiration and Utilitywill make Tablets a strong proposition for Indian consumers •  Indian consumers are price-sensitive and the device Affordability price needs to be in a ‘sweet spot’ for faster uptake User •  The overall user experience of the tablet (including the Experience device user interface) is key to hold the users’ interest Tablet Value Proposition for Indian Consumer •  Tablet’s positioning should have strong aspirational Aspiration value, so that the consumers upgrade from their existing devices •  Something for everyone makes tablet the ultimate All- Utility in-One device 36 Sources: CC Analysis
  37. 37. Most of the product categories in India witness steep uptake only after the price becomes affordable to the mass market levels Affordability India Smartphone ASP Vs Sales Trend (2010 – 2011) ‘000 USD 2,500   500   •  For a price-sensitive market such as 2,000   400   India, the cost of ownership (including Smartphone Average Selling PriceSmartphone Sales (in Thousands) device and service cost) is a key factor •  For tablets to be adopted by the mass 1,500   300   market, the pricing of the device has to be in the “sweet spot” •  The smartphones (adjacent product 1,000   200   category to tablets) sales in India have increased significantly once the average selling price of the device has 500   100   reached approximately USD 250 0   0   Q110   Q210   Q310   Q410   Q111   Q211   Q311   Smartphone Sales Trend Smartphone ASP Trend 37 Sources: CC Estimates; Industry Inputs
  38. 38. A combination of fast data connectivity, slick user interface and relevantcontent lend to the overall user experience on the tablets User Experience Factors Lending to Overall Tablet User Experience + + Faster Data Slick Device Relevant Connectivity User Interface Content •  For an overall, optimized user experience on a tablet, along with the device user interface, availability of fast data connectivity (3G/4G/Wi-Fi) and access to relevant and compelling content is necessary •  While the device user interface is a function of the software (OS and UI layer), hardware features (such as processor, RAM and display), wireless data connectivity is provided by various telecom service providers •  Tablet OEMs and carriers should potentially partner with each other along with content developers and application developers (for localized content and apps) to provide compelling user experience to the consumers 38 Sources: CC Analysis
  39. 39. Functional exposure breeds familiarity, which leads to aspiration of devices upgradation among Indian consumers Aspiration Typical Indian Consumer’s Gadget Current Installed Base of Product Ownership & Upgrade Cycle Categories Adjacent to Tablets >20 mn ~20 mn Exposure Wants Needs ~12 mnAspires for More Breeds Familiarity Owns Upgrades Progresses to Other Categories Flat Screen TVs Notebooks Smartphones •  Typically Indian consumers aspire for their next device post exposure to functionality on an adjacent category product •  This aspiration is also driven by device ownership by the peer group •  Tablets could potentially be positioned as the ‘cool, must-have’, device targeting the existing laptop and smartphone owners who can supplement their current devices 39 Sources: CC Analysis; Industry Inputs
  40. 40. The tablets’ ability to be ‘something for everybody’ needs to beoptimally exploited by the players for Indian market Ultimate Convergence Utility Computing •  Understanding the key utility and applications of a device is important for consumers •  Multiple use cases such as book reading, internet access, gaming, Consumption email, music & video consumption, video chat, etc for which different segments of consumers use different devices can be performed by tablet •  The industry players can potentially position the tablet as the ultimate Communication convergence device which caters to the users’ various computing, consumption and communication needs 40 Sources: CC Analysis; Industry Inputs
  41. 41. While utility of tablets is extremely important to the tech savvy segment,the high end youth and prosumers aspire the most Key Tablets Value Proposition Factors Relevance for Various Consumer Segments Consumer User Definition Affordability Aspiration Utility Segment Experience •  Professionals who spend Corporate most of the day in office Professionals •  Connectivity is high priority Tech Savvy/ •  Own latest device Gadget Crazy •  Early adopters •  Aspirational CategoryHigh End Youth •  May go beyond theirand Prosumers means to own better gadgets •  May not be connected to Mass Market Internet but own a communication device Extremely Important Highly Important Important Less Important Insignificant 41 Sources: CC Analysis
  42. 42. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 42
  43. 43. Indian consumers do not yet understand the core value proposition oftablets Television Mobile Phone Personal Computer Tablet•  While the average Indian consumer clearly understands the core value proposition of a Television, Mobile Phone and a PC and is comfortable using them, lack of consumer education and established core value proposition for a tablet is a major challenge in India currently•  Many Indian consumers, even in urban areas, are unable to understand the need to own a third personal device (apart from their smartphone and laptop) and justify the purchase of a tablet, especially since the price of desired models such as Apple iPad and Samsung Galaxy Tab are quite high•  The industry players need to educate the customer and the channel through both ATL1 and BTL2 communication channels to overcome this challenge 43 Sources: CC Analysis Note 1: ATL – Above The Line; 2: BTL – Below The Line
  44. 44. Lack of ubiquitous 3G network coverage and faster data speeds will failto provide optimum user experience on tablets Voice and Data Capacity for 2G Site (Erlangs) Voice and Data Capacity for 3G Site (Erlangs) 1 2 3 1 2 3 1 Total Site Capacity: 40 Er 1 Total Site Capacity: 105 Er 2 Voice Usage for 1100 Subscribers @ 0.035 2 Voice Usage for 1100 Subscribers @ 0.059 Er Er per sub per sub (assuming higher usage for 3G sub) 3 Total Capacity Available for Data Usage 3 Total Capacity Available for Data Usage•  The 3G network coverage in India is still patchy and not ubiquitous•  Most of the 3G networks in India (especially those of incumbent carriers) are not yet optimized for data. In some cases, the cell sites are configured for a maximum of 0.5 Mbps data rates, which are insufficient to provide optimum experience on tablets•  Although Aircel has deployed about 50,000 Wi-Fi hot spots in areas with high, concentrated foot falls such as malls and theaters in different cities, the usage and data traffic through these hot spots is significantly low 44 Sources: CC Estimates, Industry inputs
  45. 45. Prevalent piracy, low digital content sales and lack of alternate payment models are other challenges for uptake of Tablets in India Various Modes of Mobile Music Online Music Sales in India Total No. of Active Credit Card Access for Indian Youth (USD ‘000) Users in India (mn) 91% 40 250 69% 200 30 150 20 220 100 29 10 22 18 50 <5% 40 0 0 Sharing With Dwnld From Paid Dwnld 2007 2010 2006 2008 2010 Friends Pirated Sites From Carrier•  Majority of Indian consumers (including •  The increased number of defaults and the youth) do not pay for multimedia •  Easy availability of free, pirated content clean-up of credit cards portfolio by the content that they consume on their and high price of songs available from banks has decreased the (already low) mobile devices DRM channels number of credit cards between 2008 to•  Such behavior of Indian consumers is •  In India there is approximately 1 legal 2010 discouraging for ecosystem players download for every 50 illegal •  This is a hindrance for purchase of apps trying to monetize multimedia content downloads from tablet platform various app stores on tablets 45 Source: Nokia Mobile Music Youth Survey – Oct 2011; I-Cube 2009 & 2010 Report; FICCI Frames – PWC Report; RBI
  46. 46. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 46
  47. 47. The tablets adoption in India has been projected basis the installed baseand growth of different mobile phones and other ecosystem enablers Total Unique Classification Split of Each Growth of Mobile Potential Ecosystem Mobile Device of Mobile Type by ASP Phones (2012-14) Enablers Driving Owners Devices Segment by Type & ASP Tablets Adoption Phones (FP) Adoption by Total Installed Base of Unique Mobile Device Users (2011) Feature High ASP High ASP Industry Verticals Medium Medium Carrier ASP ASP Bundling Smartphones (SP) Adoption by Low ASP Low ASP Unconnected Segment Total Tablet Sales by Year for Bullish Base Case Bearish Different Scenarios Assumptions: •  All the Tablet owners will be existing owners of mobile phones for the forecast period. Tablets will coexist with mobile phones and/or computers •  High and Medium ASP smartphone owners will have greater share of (high and mid ASP) tablets and also will be the early adopters, followed by high ASP feature phone users, who are expected to primarily buy mid and low end tablets •  All the current and future computer (PC/Laptop/Netbook) owners will also own mobile phones (smartphone or feature phone) 47 Sources: CC Analysis, Industry inputs Note: ASP – Average Selling Price - Input - Output
  48. 48. Tablets could potentially reach the sales of over 5.5 million in 2014 Forecasts for Tablets Sales in India by Year (2011 – 2014, in Thousands) •  Globally, tablets are following the adoption ‘000 path of smartphones, and not of netbooks. We6,000   believe it will be a similar case in India as well 5,537   •  In 2012, majority of the sales are expected to come from the retail channels, and the consumers (especially, mid-tier segment) will4,000   choose to purchase either a smartphone or a tablet but not both (at least within 6 to 9 months of purchase of the former) 2,375   2,256   •  Significant adoption by verticals such as2,000   education, retail, aviation, etc and also the 1,507   924   unconnected segment is not expected before 777   2013. By then we expect ecosystem to be 378   458   214   312   ready with mobile networks coverage, digitized 0   2011E   2012E   2013E   2014E   content, communicating the value proposition, Bullish Base Case Bearish etc Feature Phone Smartphone Tablet •  High ASP - $140 to $180 •  High ASP - > $400 •  High ASP - > $500 •  Mid ASP - $80 to $140 •  Mid ASP - $200 to $400 •  Mid ASP - $250 to $500 •  Low ASP - $40 to $80 •  Low ASP - <$200 •  Low ASP - <$500 48 Sources: CC Estimates and Analysis
  49. 49. Contents Overview of Global Tablets Market Key Players in The Value Chain Potential Applications and Use Cases of Tablets for Consumers Status of Current Tablet Market in India Potential Scenarios That Could Drive Tablets Adoption in India Factors Contributing to Tablet Consumer Value Proposition in India Challenges For Growth of Tablets in India Forecasts for Tablets Sales in India Something to Think About… Convergence Catalyst Credentials 49
  50. 50. Opportunities for Tablet ecosystem in India to explode (1/2) There exist a number of potential drivers on the demand side… Parameter Key Statistic • Number of active internet users in India •  ~97 Million • Number of existing PC users in India •  Over 52 Million •  Between 15 to 18 • Number of active 3G subscribers in India Million • Number of TV Households in India •  ~ 141 Million • Number of unique mobile device owners in India •  Over 540 Million • Number of unique smartphone users in India •  Over 20 Million • Number of IT and ITES workforce in India •  ~ 2.3 Million • Number of Facebook users in India •  ~ 36 Million 50 Sources: CC Analysis; Industry Inputs, NASSCOM, TAM India, IAMAI, MAIT