One of the big puzzles in trying to understand the tablet market is data. Apple (NASDAQ:AAPL) is pretty much the only large manufacturer giving unit sales, and not only are Samsung (OTC:SSNLF) and Amazon (NASDAQ:AMZN) saying nothing, but there are hundred of Chinese companies making Android tablets, and few if any say anything publicly. In the phone business the story is rather easier, since Google (NASDAQ:GOOG) says roughly how many Android devices are being activated outside China, and give a screen size breakdown, and the Chinese mobile operators have a good sense of smartphone sales inside China. But in tablets there is no one with an overall view of sales.
This means that analysts have to fall back on component makers. Though there are hundreds of companies making tablets, they almost all use more or less off-the-shelf chipsets from a handful of companies. These companies have a good sense of the overall number of tablet chips that are being sold into the manufacturers. So too do the screen markers - they have a good sense how many 7" panels are being sold. So you take an estimate of tablet chip sales and an estimate of tablet screen sales (and take into account people using "phone" chips in tablets) and you estimate tablet sales, both inside and outside China.
The obvious problem with this is that these devices are being used in very different ways. It seems clear that most of the huge numbers of sub-$150 Android tablets now being sold do not have anything like the web or app usage that is seen on an iPad, Nexus or Galaxy Tab, and that many are mainly used as substitutes for TV sets, with maybe some gaming on the side.
The deeper issue, though, is that estimating tablet sales in this way is a little like trying to estimate global car sales by working out how many internal combustion engines are being made, and how many tires, but not adjusting for motorbikes, cranes, outdoor generators or 18 wheelers. Lots of "tablet" chips and "tablet" screens do not actually end up in tablets.
Consider this device, one of thousands of similar products on offer on Alibaba - an in-car video player running Android, complete (if the screenshot is to be believed) with the phone app. This probably doesn't activate with Google, but it certainly looks like a "tablet" to LG or Rockchip.
Then there's this TV dongle - no screen, but does it have a "tablet" chip? A "phone" chip? If you used it to watch YouTube, what would Google think it was? (Note also the memory card slot, used for side-loading pirate movies.)
Now what about this, from Steelcase? An meeting room door with a 7" capacitive touch screen. To a component maker, this is also a tablet. I have no idea if it runs Android today, but if it doesn't, it probably should. And if Nest doesn't, the copies of it will.
The important dynamic here is that a combination of very cheap off-the-shelf chips and free off-the-shelf software means that Android/ARM has become a new de facto platform for any piece of smart connected electronics. It might have a screen and it might connect to the internet, but it's really a little computer doing something useful and specialized, and it probably has nothing to do with Google.
As should be obvious, this makes counting total "Android" devices as though they tell you something about Google or Apple's competitive position increasingly problematic. But to me, pointing out that Android doesn't necessarily compete with iPad is rather boring - what's really interesting are the possibilities that these new economics might unlock.
A good example is this - a 2G Android phone wholesaling for $35 (just one of hundreds).
Now, stop thinking about it as a phone. How do the economics of product design and consumer electronics change when you can deliver a real computer running a real Unix operating system with an internet connection and a color touch screen for $35? How about when that price falls further? Today, anyone who can make a pocket calculator can make something like this, and for not far off the same cost. The cost of putting a real computer with an internet connection into a product is collapsing. What does that set of economics enable?
There are other interesting hardware trends that overlap with this as well. Bluetooth LE is the obvious one - you can make a widget that broadcasts a location ID for $50 or less, stick it on a wall, and the battery will last for years. EInk is also interesting here: it needs no power to show something, only to change, and you can pass enough power over an induction touch point to cycle the screen. The problem here is cost, but why doesn't my Oyster card show the remaining balance? Why wouldn't Coin (a product I'm rather skeptical of, mind) show the cards loaded onto it on one side with an eink display? How do these trends interact with cheap Android computing?
Marc Andreessen famously coined the phrase "software is eating the world" to describe the way functions that used to be served by dedicated hardware are now being subsumed by general purpose devices - mostly smartphones. But there's also the beginnings of a trend in the other direction - devices that weren't smart and didn't get merged into the phone gaining a digital presence of their own, and creating a new set of opportunities.