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Techtablets

Here’s how hybrid laptops are going to save the tablet market

By
Don Reisinger
Don Reisinger
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By
Don Reisinger
Don Reisinger
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October 17, 2015, 1:10 PM ET
Lenovo Ideapad Yoga 13, $999.
This so-called convertible laptop doubles as a touch-enabled tablet as well as an ultrathin ultrabook.
Lenovo Ideapad Yoga 13, $999. This so-called convertible laptop doubles as a touch-enabled tablet as well as an ultrathin ultrabook. Courtesy of Lenovo

They’re not new, but 2-in-1 hybrids—which combine the features of a laptop and tablet into a single device—are proving to be the only high point in an otherwise troubled tablet market.

The tablet market’s struggles were made abundantly clear in August when research firm IDC reported that it had revised its forecast down. The company reported that worldwide tablet shipments in 2015 will decline by 8% year-over-year, worse than the research firm’s previous forecast of a 3.8% drop. IDC, which includes 2-in-1 hybrids in its forecast, said that it anticipates 212 million tablets will be shipped in 2015.

If not for hybrids, things could have been even worse for tablets this year. IDC said that the 2-in-1 segment will see shipments worldwide jump 86.5% in 2015. IDC attributed the category’s success to its ability to “appeal to an audience seeking an alternative to pure tablets with smaller screens.”

The success of 2-in-1 hybrids has prompted a slew of manufacturers to enter the market with new devices. IDC program director Ryan Reith said in a statement in August that in the second quarter, alone, 40 vendors around the world shipped a 2-in-1 device. Just two years ago, that figure stood at 14 vendors. What’s more, there’s no sign of that trend slowing down anytime soon.

Dell last week announced the new XPS 12—a 2-in-1 tablet that comes with a 12-inch screen and a full-sized keyboard. The company’s device followed Microsoft’s (MSFT) announcement earlier this month about the Surface Book, a Windows 10-based device that takes cues from both laptops and tablets. The Lenovo Yoga, Asus Transformer, and countless other products also dot the 2-in-1 market, hoping to succeed where tablets have been failing.

“[The] 2-in-1s are the only reason we expect the overall tablet market to experience positive growth from 2016 onward,” Jitesh Ubrani, senior research analyst at IDC says. “Pure slate tablets will continue to decline as 2-in-1s become more affordable and as Windows 10 gains traction.”

Ranjit Atwal, research director at Gartner, also believes that Windows 10 will be an important driver for 2-in-1s, saying that it will be a “catalyst for change” in consumer buying behavior. He adds that solid state drives—which provide more reliable storage than their hard disk drive counterparts—along with Intel’s new processors will help spur growth in hybrids in the coming years.

“Collectively they will enable vendors to create premium-experience tablets and hybrids that can replace a notebook with minimum or no compromises,” he says.

Not even the mighty Apple (AAPL) has been able to overcome the hybrid onslaught. The company’s tablet business has slipped in the last year as shipments and revenue have seen a steep decline. During Apple’s last-reported quarter, for instance, the company reported that iPad sales revenue hit $4.5 billion, down 23% compared to the prior year and unit sales were off 18% year-over-year.

Those troubles, along with the broader market competition, have not gone unnoticed by Apple or analysts. Over the last year, Apple CEO Tim Cook was forced to fend off claims that its iPad business was in free fall, saying in an earnings call in July that he’s “still bullish on [the] iPad.”

“I think and I believe that the iPad consumer upgrade cycle will eventually occur,” he said at the time. “It’s not like people have forgotten iPad or anything. It’s a fantastic product. So I see a lot of runway.”

Cook followed up those statements with a press event in September when Apple announced an update to the iPad Mini and a new, large-screen tablet called the iPad Pro. While the latter product hasn’t launched yet, analysts don’t believe it’ll have meaningful impact on the market and turn things around. Indeed, IDC has not revised its 2015 forecast and still believes that the tablet market’s shipments will continue to decline, despite the product’s announcement.

“If [vendors] can get the pricing down, it opens the market to a much larger audience and we could see the reverse of the tablet/PC substitution phenomenon and (see consumers) move from basic tablets back to PCs of different types,” says Atwal.

Tablets, once the devices that caused consumers to buy fewer computers, are no longer as popular as they once were. Along the way, hybrids, which for a long time were ignored by a large segment of the market, now have new life. More importantly, if things keep up as analysts expect there’s only one place for hybrids to go: up.

“At last, the PC market will have devices that the user actually needs and maybe even wants,” Atwal says.

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For more on tablets, check out the following Fortune video:

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