Apple Cements Tablet Market Dominance with New iPad

Apple Inc's newest iPad was looking like another hot seller on Friday, with hundreds queueing at stores across Asia and Europe to get their hands on a gadget likely to dominate the tablet-computer market well into next year.

March 16, 2012

* Shares hit record soon after first iPad sold

* Teardown shows same key suppliers as for earlier model

* New iPad seen as series of improvements, not major innovation

* Improved screen biggest hit with customers

(Adds shoppers in London, Munich, Paris; background)

SYDNEY/LONDON, March 16 - Apple Inc's newest iPad was looking like another hot seller on Friday, with hundreds queueing at stores across Asia and Europe to get their hands on a gadget likely to dominate the tablet-computer market well into next year.

The third-generation device has only a few new features, but the buzz helped propel Apple shares to a record high of $600 in New York on Thursday.

"I just got hyped into it, I guess," said David Tarasenko, a 34-year-old construction manager who was the first to pick one up from a Telstra store at midnight in Sydney.

Daniel Bader, a software developer who builds iPad apps and was queuing outside the Apple store in Munich, said: "You can't explain it."

Even in a tough economic climate in some parts of the world, many buyers, like 27-year-old Steve Henry in Paris, said they would scrimp elsewhere if necessary.

"I save money on my other purchases for high-tech shopping," said Henry, a systems engineer at a railway company who was hoping to buy his first iPad mainly to watch films and read during his more than two hours of travel per day.

The new iPad - Apple has refrained from calling it iPad 3 - has faster chips, fourth-generation wireless, a crisper display and a better camera, making it harder for competitors like Samsung's Galaxy, which also lack Apple's range of apps and content, to catch up.

On price, too, Apple's rivals will struggle to beat it. The new iPad starts at $499 in the United States, 479 euros ($630) in Germany and 42,800 yen ($510) in Japan. Only Amazon's far more basic Kindle Fire is significantly cheaper.

Analysts expect a strong start for the latest iPad and some even expect sales of the current model to overtake the iPad 2. So far, the company has sold 55 million iPads since it was launched, kicking off the tablet market, in 2010.

Apple will continue to sell the iPad 2 but has dropped its price by $100 to start at $399.

Tablet sales are expected to increase to 326 million by 2015 with Apple largely dominating the market, according to research firm Gartner, rivalling sales of desktop computers, which Gartner expects to total 368 million units this year.

MATURE PRODUCT

The enduring popularity of Apple products, and stock, have provided Chief Executive Tim Cook, who took over after the death of Steve Jobs last year, with a good start in the job.

The share price peaked at just over $600 half an hour after the first iPad went on sale, extending the market worth of the world's most valuable company to almost $560 billion.

Only a month earlier, the stock price had crossed $500 for the first time. It has jumped 45 percent this year.

Canaccord Genuity analysts raised their target price on Apple stock to $710 from $665. Dickie Chang, an analyst with technology research firm IDC, said Cook will need to do more in future to keep up the firm's astonishing momentum.

"The iPad is already a pretty mature product and it's hard to revolutionise it any further," he said.

"Going ahead, with Tim Cook at the helm now, I think he may have to come up with another product to mark his stamp. That could come in the form of launching a smaller iPad with a longer battery life, for instance."

UBS raised its target price to $675 from $550, and said the expected launch of the the redesigned iPhone 5 in October was the big catalyst ahead.

SMUGGLERS

The new iPad goes on sale on Friday in 10 countries, including the United States, Canada, Singapore, France and Britain.

Most of those countries outside the United States do not yet have the faster, fourth-generation telecoms networks that the new iPad supports, but some buyers travelled from countries where it is not expected to be available for several months to get their hands on one.

"I've come from Russia to buy an iPad for my three-year-old son David," Oleg Konovalov, a newspaper salesman, told Reuters in Tokyo. "Everyone in Russia wants an iPad, but to buy it there I will have to wait several months."

"This reminds me of the time 30 years ago when I waited 8 hours in the cold to see Lenin's Mausoleum."

In London, 21-year-old Piotr, who works at noodle bar Wagamama, said: "It's not for me, it's to sell. I will bring them to Russia to sell them."

In the Chinese city of Shenzhen, people keen to get their hands on the new iPad waited for them to be smuggled across the border from Hong Kong.

"We don't have iPad3s yet, but some will arrive later in the day when the students deliver them to us. We'll have more supplies over this weekend," said a store operator in Shenzhen.

"Customs has become stricter, but if you take one at a time across the border, that's still pretty safe. At most they'll ask you to take it out of the box to prove that it's for self use."

Online reviews of the new iPad overwhelmingly praised Apple for its improved screen resolution.

"My epiphany came when I placed my iPad 2 next to the new model, with the same text on the screen. Letters and words that had seemed sharp on the older model five minutes earlier suddenly looked fuzzier," said one online reviewer.

Shintaro Aizawa, 16, who waited 15 hours outside a Tokyo store: said: "After this, well, I'll first of all open it up and check it's as beautiful as I thought. Then I'll get some sleep."

GOLD STANDARD

As consumers lined up around city streets to buy the iPad, one firm that took the new device apart said Qualcomm, Broadcom, and Samsung Electronics had all held onto their prized roles as key parts suppliers.

Supplying parts for Apple's iPhones and iPads, the industry's gold standards, is considered a coup for chipmakers and other manufacturers.

The inner workings of the iPad are similar to previous models, based on a "teardown" by a tinkerer from California gadget-repair firm iFixit, who queued up in Australia to get one of the new tablets and quickly took it apart for a Web blog.

IFixit said the iPad's display appears to be from Samsung, Apple's closest rival in the tablet market.

The iPad includes a Qualcomm LTE cellphone chip and a Qualcomm wireless modem for 3G and 4G. Broadcom supplies a semiconductor handling wireless tasks like WiFi and Bluetooth, according to iFixit.

The iPad's new A5X application processor, with improved graphics horsepower, is based on energy-efficient technology licensed from Britain's ARM Holdings and is manufactured by Qualcomm, as in past Apple devices.

A NAND flash memory chip, used to store media like music and video, is supplied by Toshiba. Japan's Elpida provides the DRAM chips.

The iPad teardown also revealed chips from Avago Technologies, Triquint Semiconductor and Fairchild.

Analysts recommend caution in drawing conclusions from the teardowns because Cupertino, California-based Apple sometimes uses more than one supplier for a part. What is found in one iPad may not be found in others.

Still, teardowns remain a key source of information for investors interested in betting on Apple's suppliers, and the appearance of unexpected chips can move stocks.

"There are a whole lot of hedge funds out there that like to shoot first and ask questions later," said Alex Gauna, an analyst at JMP who covers technology stocks.

(Additional reporting by Lee Chyen Yee in Hong Kong, James Topham and Ruairidh Vikllar in Tokyo, Sisi Tang in Hong Kong; Jens Hack in Munich and Axelle du Crest in Paris; Writing by Georgina Prodhan; Editing by Michael Perry and Andrew Callus)

Copyright 2010 by Reuters. All rights reserved.