Phablets Aren't Just A Fad Here's Why

Ross Rubin | February 20, 2013

Phablets Aren't Just A Fad Here's Why

Ross Rubin | February 20, 2013

At the time the iPhone was introduced, its 3.5-inch screen was considered huge. The large screen was in part necessary to accommodate an on-screen keyboard, something Apple viewed as key to correcting wasted real estate on physical keyboard-based devices like the BlackBerry or Palm Treo. Of course, competitors using the Android platform eventually responded by trying to one-up Apples devices in many ways screen size among them.

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When Sprint introduced the first 4G phone, the HTC EVO 4G, in mid2010, many thought the 4.3-inch display would be too large, but the phone was a hit. Samsung upped the ante with the 4.5-inch Infuse smartphone in January 2011. (Note: Phone and tablet screen sizes are measured diagonally across the face of the display.) On the tablet side, screens were getting smaller, shrinking the distance between phone and tablet display sizes. There were many 7-inch tablets introduced, including the original Galaxy Tab, and less expensive successors, including the Kindle Fire, Nook Color, and Google Nexus 7. A new notion was emerging about the convergence of smartphones and tablets. But the term "phablet" something between a phone and a tablet didn't come to be widely used until Samsung broke the 5-inch barrier with the first Galaxy Note. (Please see our guide to screen sizes in the Appendix at the end of this report.) Samsung itself plays on the ambiguity in its current campaign for the Galaxy Note II with the tagline Phone? Tablet? Best of Both. In this report, we'll investigate whether phablets are here to stay, and dig into how smaller tablets and larger smartphones are changing the way consumers use their devices.

Barclays sees phablet shipments climbing from 143 million units shipped this year, to 228 million by 2015. IHS iSuppli is more conservative, projecting 146 million units by 2016. Both sources use the standard definition of phablets as including phones with 5-inch and larger screens. (See chart at the top of this section.)

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Asian markets will account for a majority of phablet sales before long, as large-screen handsets mostly running Android have proven especially popular in Korea and China. Many emerging market consumers will be mobile-first Internet users, and it makes sense that they will choose large-screen devices adept at media consumption and Web browsing.

5-inch and larger phone screens, many of which are HD, lead to a greater likelihood of consumer app downloads, Web downloads and video viewing. Phablet adoption will be a plus for the overall mobile ecosystem.

The phablet trend could fade if battery drain isn't improved, or if an alternative screen technology emerges. However, widely available foldable or rollable displays still seem a long way off.

Click here for the charts and data associated with this report in Excel

March of the phablets

The term "phablets" has been greeted with some derision by the tech press, but consumers have flocked to buy them. Samsung has reported that the Galaxy Note II sold five million units in the two months after the launch. That is much faster than the original Note, released in late 2011, which took three months to hit the three million-mark.

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The Galaxy Note II sold 8 million units in the fourth quarter of 2012, according to Samsung's last earnings report. (That was up from 3 million units in the third quarter.) It's evidence that, at the very least, a significant subset of consumers want jumbo screens on a carry-everywhere device. Of course, it's good to remember that these sales numbers are still a far cry from the results for Samsungs flagship Galaxy smartphones. Samsung sold 20 million Galaxy S III devices in a similar timeframe. What's certain is that phablets aren't going away any time soon, they've found a place in all the manufacturers' product lineups. At the 2013 Consumer Electronics Show (CES), Huawei made a bid to oust Samsung as the king of big phones, announcing its 6.1-inch Ascend Mate. (One tech journalist described it as a "monster phone.") Also at

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CES, Sony joined Samsung, LG and HTC in the 5 inch-and-over club in announcing the Xperia Z. Phablets have been especially popular internationally Samsung's Galaxy Note II has already sold 1 million units in South Korea alone and analysts such as Ben Reitzes of Barclays have pointed to phablets as a big driver of smartphone growth in emerging Asian markets: "... the larger screen seems to be more popular outside of the U.S. and the phablet has significant momentum in China." ABI research predicts that the Asia Pacific region will see a majority of global phablet sales, when defining phablets as devices with screens five inches and larger, by 2017. (See charts, below.)

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The phablet holdouts

Screen size and display resolution are two key ways that smartphone companies are distinguishing newer models in the hopes of pursuing consumers to upgrade, and that's one thing that's pushing phablet sales. Meanwhile, some companies have chosen to stick with more modest phone sizes. Nokias first Lumia, the 800, had a 4-inch screen size, and the company has stayed with 4.5 inches or smaller in its Lumia line although the display sizes have been growing gradually. BlackBerry, the company formerly known as RIM, got burned badly on its 7-inch PlayBook mini-tablet, and has launched its new BlackBerry 10 devices at screen sizes below the now run-of-the-mill 4.3 inches.

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Apple hasnt fully capitulated to the phablet and screen-expansion trend, and some analysts have fretted that it's losing market share to Android as a result. In fact, Android has gotten a boost from sales of large-screen devices, many of them manufactured by Samsung. In September, Kantar Worldpanel estimated that 29 percent of Android device sales in mid-2012 were of handsets in the 4.5-inch and above category. While that size range also encompasses models like the 4.8inch Samsung Galaxy SIII, the point is that a screen size that was once considered extreme is now virtually the norm. (See chart, below.)

However, Apple has gradually begun to embrace larger phones and smaller tablets. The iPhone 5 stretched the iPhones display to 4 inches from 3.5 inches. (Many analysts believe Apple will release a 5-inch or

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larger iPhone by 2014 to avoid ceding more ground to the Android OS and Samsung devices.) The iPad mini was released with a 7.9-inch screen, compared to the fullsize iPad's 9.7-inch display. Interestingly, other than the screen size, virtually all the specifications of the iPad mini are comparable to or better than the more expensive iPad 2 that Apple has kept in its tablet lineup. That's a signal that smaller tablets don't necessarily sacrifice performance as screen sizes shrink.

More apps, more media

Theres a saying in consumer electronics that consumers want the biggest possible screen size on the smallest possible device, or "form factor." It's a somewhat paradoxical statement smaller devices will necessarily carry smaller screens but it highlights the fact that consumers want the best of both worlds: large, bright HD screens on which to view websites and media, and portable devices that they can carry with them everywhere. The rise of bigger screens has accompanied a larger shift: the move from voice to data. As wireless carriers have rolled out 4G LTE and other technologies that allow for faster data transfers over cell networks, consumers have begun to migrate to data-heavy tasks: Web browsing, gaming, and video. These activities are more enjoyable on larger screens and drive consumers to devices like the Note and Ascend Mate. Conversely, these gadgets' large, high-resolution displays are a boon for content providers looking to create richer Web sites and denser apps. According to an August 2012 Kantar Worldpanel study, consumers using larger phone screens are more likely to engage in just about every mediarelated activity, even those where the display plays a limited role, such as

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listening to music. For activities where screens are important, like video viewing and Web browsing, the difference was even more pronounced. (See chart, below.)

But here's a key metric for developers: The percentage of consumers who downloaded apps also saw a big leap as screen size extended to five inches and above. The reasons for why larger screens drive more usage are intuitive. A bigger screen helps to create a more immersive experience, drawing consumers toward mobile media. It also helps to create better interactivity, with bigger screen keys and buttons that are easier to tap. Additionally, these screens are easier to see for those with poorer eyesight. There's also the emerging trend of simultaneous multiple app viewing. Samsung has put software on its phones (and tablets) to allow one to view two apps at once. Microsoft has a similar feature in Windows 8

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called Snap, but does not support it in Windows Phone devices, which have yet to crack the five inch-plus phone market.

The downside to phablets

Unfortunately, big screens can also cause big problems. One of them is clearly ergonomics. Manufacturers have done a good job of boiling the frog." In the same way that a frog can famously survive many hot water temperatures before finally hitting its limit, incremental screen expansions don't immediately push devices toward an unwieldy size. But eventually, manufacturers will hit a wall, and won't be able to make larger phones (or mini tablets) that fit easily in the hand, pocket, or purse. And it's not as simple as fitting in the hand. A phone should feel balanced and stable in a consumer's hand, which is a challenge as phone sizes grow. More glass also leaves a smartphone more vulnerable to damage, although it has been a boon for Corning, which sells the tough Gorilla Glass used in many handsets, as well as for Corning's competitors. On the tablet side, many believe smaller tablets will speed the adoption of tablets as media consumption devices, since they are more portable than full-size 10-inch devices like the iPad. It's an open question whether consumers will come to prefer hugescreened phones like the 6-inch Ascend Mate phablet, or instead, smaller tablets in the 7-inch range like the Nexus 7 or iPad mini. Either way, bigger screens aren't just less ergonomic than those on normal-sized phones; they're also battery hogs. Large screens, particularly at a higher resolution such as that of the Droid DNA, drain more power always a concern on smartphones. The

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bigger size allows for a bigger battery, which can compensate, but that also adds weight, and these devices are already heavier than the standard smartphone. And specifically within the world of Android devices, many apps aren't optimized for larger screens. Many Android developers don't design with bigger displays and higher resolutions in mind, and the result is that many Android apps don't look as pretty on big displays as their iOS counterparts might on the iPad. This may change quickly though, as developers catch on to the fact that Android tablets are beginning to steal market share away from the iPad. Another question is whether phablets, if they catch on, will cannibalize sales of smaller smartphones and tablets, leading to lost revenue. In other words, manufacturers like Samsung and LG may gain from phablets, but these may be users who otherwise may have purchased two devices: a smartphone and a tablet. At the same time, there's another angle to the cannibalization story that's more positive for phablets. It may be that phablets, as an extremely versatile and media-friendly alternative, will actually lure consumers who otherwise may have purchased a desktop or laptop PC (especially in emerging markets with low PC penetration). In this case, Samsung and other mobile-focused manufacturers will have gained by using phablets to attract new mobile consumers. For now, devices above 5 inches in screen size remain a small proportion of the Android landscape. That's partly a function of how massive sales of smaller Android devices have been over the last two years. But it's also an indication that the phablet market is a newer segment, and could still see some upheaval. We're bullish on larger screens on phones and smaller screens on tablets, but there's always the chance that phablets will be disrupted by a new type of mobile screen.

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Other ways to go big

A long term risk to the phablet approach is from emerging technologies that do away with the need for a large screen, giving consumers options for large displays that don't reduce the handset's portability.

Projection displays, generally powered by digital light processing, havent been very popular on smartphones, in part because they add thickness. However, even if they did not, it is not often practical to project the display away from home. For example, subway riders wouldn't be able to project displays to watch a video.

Flexible displays have been demonstrated by Corning, Samsung and others and hold potential for a screen that could roll out of a small device. However, these are still a ways off, as

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it's a challenge to make other parts of the phone, such as the chips, bendable or rollable.

ASUS has created its own spin on the phablet concept with the Padfone. It's a handset that docks into a larger tablet, which doesnt have any functionality on its own and basically acts as a larger supplemental display. So far, though, this approach has had very limited appeal.

Another possibility is using secondary smaller devices for calls. These may be a Bluetooth headset or the HTC mini, used as a small companion phone to a phablet. The idea is that you can carry a phablet in your pocket but make calls on a headset or "mini" without having to pull out the larger device. Recently released in China alongside the 5-inch HTC Butterfly (known as the Droid DNA in the U.S.), the HTC mini is a slim throwback to the 1990s design-wise, with a small display and keypad.

However, given the fact that consumers seem to prefer larger screens, it's likely that the race will always be to create the largest possible display without sacrificing convenience. Whatever the long-term solution (companion phones, bendable or foldable screens, etc.), it's likely manufacturers will begin to push the limits of screen size once more. And the cycle will begin anew.

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THE BOTTOM LINE

Driven by lower prices for larger displays, and mobilefirst emerging market consumers, the phablet market will continue to grow. While still not mainstream, these products have proven popular. That has provided a boost to Google's Android as the only operating system currently on 5inch or larger phones from major manufacturers.

Will consumers prefer 5-inch and 6-inch phones to 7inch tablets that can't place calls? Will they take to both? The answers to these questions is still up in the air.

Mobile content and app developers benefit greatly from phablets. Larger displays, particularly when paired with higher screen resolution, allow users to see more content on Web sites and have a richer experience with games and movies. App developers will want to optimize for larger Android phones as these represent a larger share of the overall market and consumers who own them are aggressive adopters of apps and other content.

The upper limit for size is in sight. Phablets place demands on ergonomics and portability. Phones such as the 6.1-inch Huawei Ascent Mate push the envelope for phone size. Presentday solutions to the size limit, such as using a complementary headset, may one day give way to new display technologies, especially rollable or foldable screens.

Click here for the charts and data associated with this report in Excel APPENDIX: (Items in bold are either the current versions of device line, or forthcoming.)

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Screen Size 2.5 2.6 3.1 3.2 3.5 3.6 4 4.2 4.3 4.5 4.8 5 5.3 5.5 6 6.1 7

Where Used BlackBerry Bold HP Veer Palm Pre BlackBerry Torch Original iPhone BlackBerry Q10 iPhone 5 BlackBerry Z10 HTC EVO 4G (WiMAX) Samsung Infuse, Nokia Lumia 920 Galaxy S III Droid DNA, Sony Xperia Z Galaxy Note Galaxy Note II Amazon Kindle (e-paper) Huawei Ascend Mate Galaxy Tab 2, Kindle Fire, Galaxy Nexus 7, ASUS Eee PC netbook

7.7 7.9 8.2 8.9 9.7 10.1 10.6 11.6 13.3

Galaxy Tab 7.7 iPad mini Motorola Xyboard 8.2 Galaxy Tab 8.9 iPad Motorola Xoom, Galaxy Note 10.1, DellXPS 10 (Windows RT) Microsoft Surface HP Envy x2, 11 MacBook Air 13 MacBook Air/MacBook Pro, Toshiba Excite 13

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