The Rise of the Ipad and Tablets: Assessing Winners and Losers in the Global Tmt Ecosystem

Topics: Goldman Sachs, ARM architecture, Marcus Goldman Pages: 10 (2762 words) Published: November 5, 2010
July 13, 2010

The rise of the iPad and tablets: Assessing winners and losers in the global TMT ecosystem Research Report
Apple masters “5Cs” with the iPad, creating a device distinct from PCs & previous tablets Relative to traditional PCs and past tablets, we see Apple’s iPad ecosystem as unique in 5 key ways, which we call the “5Cs”: (1) Consumption: the iPad focuses on information consumption versus production; (2) Content: the iPad is tightly integrated with content; (3) Connected: the iPad is “always connected”; (4) Constant operation: the iPad is an “instant on” device with all-day battery life; (5) Commerce: Apple’s ecosystem ensures that consumers are always “ready to buy.” James Covello

(212) 902-1918 Goldman Sachs & Co.

Assessing the impact on the PC ecosystem
Based on our analysis of the tablet market we expect: (1)16 mn tablets in 2010 and 35 mn in 2011, (2) tablet sales to begin to impact the notebook market in 2011, with about 40% of tablet sales being cannibalistic to notebooks or netbooks (and 95% coming out of netbooks in the first year).

James Schneider, Ph.D.
(917) 343-3149 Goldman Sachs & Co.

Sarah Friar
(415) 249-7436 Goldman Sachs & Co.

Winners and losers from the tablet transition Primary winners: (1) Apple, from its leadership position with the iPad and corresponding profit pool, (2) ARM, as we expect most tablets to be designed with low-power, ARM-based chips, (3) component vendors with significant iPad content including Samsung, Infineon, Broadcom, Linear. Secondary winners: Hon Hai, Murata, Citrix, Lam, Qualcomm, SanDisk, SBA Comm., Crown Castle, Syniverse, media companies, SaaS apps, CDNs. Primary losers: (1) Microsoft, given the impact of lost Windows sales and its lack of a competitive tablet response, (2) Intel and AMD, as they suffer lost unit volumes to ARM-based competitors, (3) HDD makers, Marvell, LSI given the move to solid state storage from hard drives in tablets. Secondary losers: Micron, Acer, ASUSTeK, Barnes & Noble, RadioShack, Best Buy.

Henry King
+852-2978-0748 Goldman Sachs (Asia) L.L.C.

Proprietary consumer survey suggests meaningful net/notebook cannibalization We conducted a survey of 1,000 US consumers to gauge attitudes toward the iPad and tablets. Our main takeaways: (1) a significant number of consumers see tablets as viable replacements to PCs; (2) cost remains the single largest barrier to tablet adoption; and (3) consumers view PC brands as better positioned than handset brands. As for the enterprise, our survey of 90 hedge fund CTOs showed a similar trend, with about 70% expecting to replace some notebooks with tablets in the next two years.

Daiki Takayama
+81(3)6437-9870 Goldman Sachs Japan Co., Ltd.

Matthew J. Fassler
(212) 902-6740 Goldman Sachs & Co.

James Mitchell, CFA
(212) 357-1849 Goldman Sachs & Co.

Simon F. Schafer
+44(20)7552-3631 Goldman Sachs International

The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC certification, or go to Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc.

Global Investment Research

July 13, 2010

Global: Technology

Table of Contents
What has Apple done differently with the iPad? Designing for “5Cs” of user experience We see specific winners and losers that can be attributed to the “5Cs” of user experience...
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