Last year I wrote a blog post about the rising popularity of productivity-focused 2-in-1 tablets; an industry shift spearheaded by the Microsoft Surface. At the time, I noted the advantage Microsoft had due to its established presence in the segment. Although the summer of 2015 proved to be a pivotal moment for productivity-focused 2-in-1 tablets, as evidenced by the success of Microsoft’s line of Surface products and subsequent launch of competing 2-in-1s and productivity-focused tablets, the long term success for Microsoft was the need for a mobile operating system capable of delivering the same productivity features of a regular PC. The rise of 2-in-1 tablets helped establish Windows as an operating system in the mobile market, and Windows 10 is now the preferred operating system for mobile-focused flagship devices from a range of PC vendors. Additionally, it fostered relationships with new OEM partners.
Success of Surface
As noted, the summer of 2015, was a key moment for the tablet market. Following roughly two years of disappointing Surface results, including a $900 million hit in its fiscal Q4 2013 (calendar Q2 2013), Microsoft was beginning to see a dramatic turnaround for its Surface division with the launch of the Surface Pro 3 and Surface 3. During the three month period ended June 30, 2015, Surface revenue grew 117% to $888 million and Microsoft announced it would expand the number of Surface resellers from 150 to more than 4,500 globally. Even Dell and HP agreed to sell Microsoft Surface devices to enterprise channel partners as part of a program titled the Surface Enterprise Initiative.
Growth of Detachables
At the start of 2013, detachable tablets represented only a small portion of the market, capturing 12% of the retail shelf. However, there has been a dramatic shift in the retail landscape and gap intelligence‘s retail data shows that 2-in-1 tablets currently occupy 42% of the brick-and-mortar retail shelf. The global tablet market has faced a downturn for the past couple years due to the steady decline of slate tablets, but the popularity of detachable tablets led IDC to predict worldwide shipments will return to growth by 2018.
The success of Microsoft’s Surface drove the other PC software providers to believe that their mobile ecosystems were compatible with business and work oriented capabilities. Apple revealed the 12.9-inch iPad Pro iOS tablet with an aggressive prosumer marketing campaign and Google released the Android-powered Pixel C 2-in-1. Although Apple’s iPad Pro has found success (but not enough success to stem declining iPad shipments), Google’s attempt to prove the productivity angle of the Android operating system was not as successful and both PC and mobile OEMs have shifted to Windows for their 2-in-1 hardware.
Although the growth of Windows tablets in retail has not been as dramatic as the overall rise of 2-in-1 detachables, Windows tablets did increase retail shelf share from 14% at the start of 2013 to a peak of 24% for the 2015 holiday season. IDC predicts that Windows tablets (including both slate and 2-in-1 devices) will increase from its current 8.6% global share to 19.3% by 2020, a level which rivals the estimated 22.9% share of Apple’s worldwide tablet share.
Windows Adoption Across OEMs
Through its commitment to the Surface line, Windows is now a cornerstone of the anticipated growth of the PC market and major vendors spent the past year launching flagship 2-in-1 products, styled after Microsoft’s Surface design. Earlier this year, Samsung launched its first Windows tablet in over three years with the Galaxy TabPro S, Acer similarly released the high-end Switch Alpha 12, and Asus has announced its new Transformer line of detachables. Mobile-focused vendors that have not previously released PC products have turned to Windows to release their own 2-in-1 tablets. At the Mobile World Congress tradeshow Alcatel and Huawei both announced new Windows 2-in-1 products, and neither had previously released a traditional PC product. Huawei’s MateBook Windows 2-in-1 has played a pivotal role in the Chinese vendor’s entrance in the US Market as well and before the MateBook arrived at the Microsoft Store, Huawei only had one other tablet available in US retail space.
Although the Surface developed into a hardware success story for Microsoft, the real value in the success of the Windows 2-in-1 tablet was expanding the Windows ecosystem. The Windows operating system developed from a small, niche portion of the mobile PC market to one of the primary drivers for future growth. The need for mobile computing devices in both enterprise and consumer markets will only drive further adoption of Windows tablets.