Is Amazon Burning Apple with Kindle Fire?

In the closing days of 2011 it was reported that Amazon’s shipments of Kindle Fire were stronger than expected. It was launched in mid-November. By the end of 2011 Amazon announced about 4 million Kindles were shipped in December alone, of which more than half were the Fire. Amazon has not yet released official end-of-year results. The Kindle Fire is estimated to have shipped between 4 and 5 million units in its debut. According to Amazon “Kindle Fire is the #1 best-selling, most gifted, and most wished for product across the millions of items available on Amazon.com since its introduction 13 weeks ago.“

Has this hurt Apple iPad2 sales in 4Q 2011? There are some reports that Kindle Fire took away 1 to 2 million units of potential sales from Apple. However, Semico views this as just speculation at this point. There have been no official statements from Apple on results of this most recent quarter. The company had not made any definitive statements on sales projections for Apple iPAD2 for the quarter. In light of the fact that the tablet PC market is still relatively new and we experienced various supply chain disruptions due to earthquakes and floods, one could not expect otherwise.

Semico is currently estimating Apple iPad2 shipments to be about 15 million units in 4Q 2011. This would result in Apple shipping just over 40 million iPads in 2011. Semico projects that total tablet PCs will ship 60 million units in 2011. Thus, Apple will hold about 67% market share in 2011. In 2010 Apple held 87% share, but there was hardly any competition at the time. If Kindle Fire actual shipments are in the mid-range of the estimate (about 4.5 million) then Amazon will have carved out 7.5% market share in less than 2 months.

At the beginning of 2011, Semico noted there were about a hundred tablet PC models entering the market. We also expected to see a major shake out during the year with only a handful of competitors emerging from this huge pack. Kindle Fire was a late entry but made the biggest splash of all the iPad contenders.

Did Kindle Fire cannibalize iPad? There may have been some but Semico does not believe it was to the extent that has been speculated by others. The lowest priced iPad2 is $499 while the kindle Fire is $200. Semico believes that many of the Kindle Fire customers may not have considered iPad2 to begin with, due to the price. Reviews indicate that the iPad2 has more capabilities than the Fire – well what do you expect given the price difference?

What will 2012 bring? Since the shakeout of 2011, there will be new products but vendors will have to learn from those that fell by the wayside. Apple and Amazon offer a lot of apps and content. Price is a key factor. It has been rumored that Apple may come out with a smaller size iPad and reach a lower price point. Google will be coming out with a tablet in 2012. Will it go after Amazon? If vendors are looking to get into the corporate world security issues need to be addressed. Semico expects to see continued strong sales of tablet PCs in general with a growth rate of over 40%.

Tony Massimini
Chief Technology Officer
Semico Research Corp.
tonym@semico.com
602-997-0337 X3