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New phablets from Apple, Samsung could revive mobile market

Aaron Pressman
Samsung President DJ Lee presents the new phablet Galaxy Note 4 at the Unpacked 2014 Episode 2 event ahead of the IFA Electronics show in Berlin, September 3, 2014. REUTERS/Hannibal Hanschke (GERMANY - Tags: BUSINESS SOCIETY SCIENCE TECHNOLOGY TPX IMAGES OF THE DAY)

Forget tablets, suddenly it’s phablets that are going to save the mobile industry.

Yes, those oversized phones slash miniature tablets with screens measuring 5.5 to less than 7 inches – the kind Samsung (005930.KS) has been selling by the boatload for the past couple of years and Apple (AAPL) is about to horn in on, at least according to highly credible rumors.

And just as tablet sales have slowed to a crawl, phablet sales are increasing fast enough to fill the gap. They may, in fact, be displacing sales of tablets.

Market watchers at International Data Corp estimate 175 million phablets will be shipped this year, versus 233 million tablets and 1.1 billion smartphones. But looking forward, they expect phablet sales to increase at a compound average growth rate of 60% for the next five years, versus 6% for smartphones and 7% for tablets. Don’t even mention laptops and desktops, with sales projected to shrink an average of 1% and 2%, respectively, per year.

Tough to predict

It’s tough to put too much trust in five-year forecasts for an industry facing as much change and upheaval as the mobile-device market. Back in 2009, who would have predicted Blackberry (BBRY) and Nokia’s (MSFT) minuscule market shares today? Or that the iPad would arrive on the scene in 2010 and zoom to more than 200 million sold in four years?

And, of course, not everyone has been a fan of the phablet model, with some consumers and reviewers noting its clunkiness, particularly when it comes to holding such a large device to your ear to make a call.

IDC is aware of the forecasting challenge, and hedged appropriately. "What works well today could very well shift tomorrow as phones gain larger screens, tablets become more powerful replacements for PCs, and even smartwatch screens join the fray,” Tom Mainelli, program vice president at IDC, said in the release.

Samsung’s newest entries, unveiled this week in a three-city, simultaneous press conference extravaganza, should keep the company’s sales on track for now, but they still depend on Google's (GOOGL) Android software and are not likely to change the game much. Luckily for Samsung, phablet sales are still growing fast enough to mask any weakness as Apple’s new phat iPhones, as well as a crop of cheap Asian models, hit the market.

The updated Galaxy Note 4 with a 5.7-inch screen dumps the cheap plastic of prior models for a sexier and more Apple-like metal frame and includes an even higher resolution screen and camera. Analysts mostly yawned, although the higher-end Note Edge, with a screen that wraps around the edge of the frame providing additional space for notifications and such, drew impressed early chatter.

Business Insider/Lisa Eadicicco The Galaxy Note Edge Samsung has been showing off its flexible display technology for years, but now we’re actually seeing these panels appear in everyday smartphones. Samsung’s new Note Edge, which the company unveiled Wednesday, may look like an ordinary smartphone at first glance, but upon closer inspection you’ll notice the curved secondary screen that gives the device its name. The curved portion of the screen works independently of the main display. Other than its rounded screen, the Note Edge is identical to the new Galaxy Note 4 in terms of hardware. That means it has the same sharp 2560 x 1440 resolution display and the S Pen stylus. Samsung has shown prototype devices like this in the past, but this is the first time we’re seeing such a device that will actually launch. The Note Edge will be available on AT&T, Verizon, Sprint, and T-Mobile later this fall, but pricing has yet to be announced. Samsung said it will be priced the same as its premium handsets, hinting it’ll probably cost around the same as the Note 4. (Previous Note phones went for about $300 with a carrier contract.) Business Insider/Lisa Eadicicco The side screen can turn on independently from the main screen. The curved portion of the Edge has two main benefits, according to Samsung. First, it can provide information such as the time, alarms, and news headlines while the phone’s main screen is turned off. Second, it supposedly makes it more convenient to use certain apps since the curved sidebar changes depending on which app you’re using. For example, if you’re using the phone’s camera, controls such as the capture key and various mode buttons would appear on the rounded edge. This, according to Samsung, gives you more real estate on the main screen. Business Insider/Lisa Eadicicco You can control apps on the side screen too. While this may be true, there were also instances in which it became an annoyance. In some cases the curved part of the display overlaps with the main interface and cuts off certain buttons. During a product demo, we also noticed that the orientation didn’t change when the phone moves. Samsung said that the orientation switches to face you when the main screen is turned off, and you’ll be able to interact with the curved screen when it’s in this mode. So, theoretically, you’ll be able to conserve battery power by turning your phone’s main display off, and scrolling through news headlines, stocks, and checking the time on the Edge’s rounded secondary screen.  Samsung says it’s already working with companies like Yahoo to provide information that can be viewed across the Edge’s secondary display. The company hopes to rope more developers into incorporating this functionality into their apps. For what it’s worth, the Note Edge’s second screen was extremely responsive. It was easy to flip through different app icons and home screens on the phone’s rounded display. If you flick to hard when you’re trying to scroll through screens on this smaller display, however, you’ll accidentally launch apps. It’s interesting to see Samsung launch more consumer products using its curved display technology, but it’s unclear if the Note Edge will be a hit or just a niche product.  Read more stories on Business Insider, Malaysian edition of the world’s fastest-growing business and technology news website.

Even as Samsung struggled to lift its smartphone sales with the underwhelming Galaxy S5, phablets have been a refuge from Apple at the pricey end of the market and Asian competitors such as Huawei and Lenovo (0992.HK) at the low end.

“Samsung has been very careful this time around to make sure that the design language communicates that these are premium devices,” says Ken Hyers, an analyst at Strategy Analytics. “The new Notes are preemptive strikes against Apple’s new iPhone and, I think, will be very successful.”

Still, Apple has legions of loyal fans and the ability to extend its already popular iTunes app and media ecosystem into the phablet sector.

The rumored 5.5-inch iPhone could cannibalize sales of some of Apple’s own iPad mini, but that wouldn’t displease CEO Tim Cook. The phone likely carries a much higher retail price and profit margin than the mini.

The downside could be that customers who formerly bought both an iPhone and iPad might decide the iPhone Phatty meets all of their needs. And that would most certainly not please Mr. Cook & company.