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iPad to face greater challenges for market share, says analyst

The iPad will see increasing competition not just from 7-inch tablets but potentially from new touch-screen ultrabooks, forecasts a Citi analyst.

Apple's 4th-generation iPad.
Apple's 4th-generation iPad.

The market share for Apple's 10-inch tablet will continue to shrink this year despite the debut of a fifth-generation model, predicts Citi analyst Glen Yeung.

The larger iPad has already been hurt by demand for its own smaller sibling. Following the launch of the iPad Mini in October, fourth-quarter sales of the 10-inch version dropped by 9 percent in the U.S. and by 26 percent in Japan year over year, Yeung said in an investors note released yesterday.

But the Mini wasn't the only thorn in the side of the 10-inch iPad.

Consumers gravitated toward other 7-inch tablets, such as Samsung's Galaxy Tab, Amazon's Kindle Fire, and Google's Nexus 7. Overall, the market share for 7-inch tables jumped to 41.2 percent in the fourth quarter from 12.6 percent in the second quarter of 2012. Over the same time, the share held by 10-inch tablets fell to 40.6 percent from 67.3 percent.

The iPad itself has shed a fair chunk of market share.

Data released by IDC at the close of January showed a 43.6 percent share for Apple's tablet in the fourth quarter, down from 51.7 percent a year prior. Meanwhile, Samsung saw its tablet share rise to 15.1 percent from 7.3 percent. Asus, which manufactures the Google Nexus tablet, grabbed a share of 5.8 percent, up from 2 percent.

"But beyond simply the overall share loss, the data reveals a particular slowdown in 10-inch iPad sales in mature markets and a clear downward trend in tablet ASPs (average selling prices)," Yeung said. "After analyzing the data, we have new concerns about the health of the 10-inch tablet market and, absent any material innovations (we do not count a Retina Mini or lighter/thinner iPad 5 among these), we remain concerned about Apple's ability to maintain market share."

And it's not just rival 7-inch tablets that pose a threat, according to the analyst.

Yeung doesn't see much innovation coming from tablets later this year but he does see it coming from PCs, specifically ultrabooks.

Intel will require all new ultrabooks based on its Haswell processor to have touch capabilities. The chipmaker has also been eyeing prices for these new machines as low as $599.

As such, these types of touch-based, ultra-thin, all-day notebooks priced just right could create competition for the iPad and other 10-inch tablets, according to Yeung.