Apple’s recent launch of the iPad has raised questions about the device’s cannibalization of sales of the MacBook product line. I don’t believe this matters in the long run. To explain why, I am borrowing some text from a book I am currently reading, Clayton Christensen’s The Innovator’s Dilemma.
The fear of cannibalizing sales of existing products is often cited as a reason why established firms delay the introduction of new technologies. As the Seagate-Conner experience illustrates, however, if new technologies enable new market applications to emerge, the introduction of new technology may not be inherently cannibalistic. But when established firms wait until a new technology has become commercially mature in its new applications and launch their own versions of the the technology only in response to an attack on their home markets, the fear of cannibalization can become a self-fulfilling prophecy.
The second part of the paragraph, which I have bolded, is relevant to the question of MacBook revenue cannibalization by the iPad.
Divisions within Apple have come together to create new technologies that are found in the hardware of the iPad. One example of this, is the Apple A4 Chip. According to Apple, the chip is “custom silicon” that is “the most advanced chip” that Apple has used to date. Richard Doherty, director of technology consulting firm Envisioneering Group, opined on Apple chip technology versus competing silicon companies:
There’s nothing that I can see from ARM licensees or Intel that could challenge the power-per-watt, the power-per-buck, the power-per-cubic-millimeter of size. Apple is going to have quite a performance, battery efficiency, and cost advantage over the competition.
As technology has evolved, the manner in which we interact with devices has evolved too. Mary Meeker of Morgan Stanley recently included this slide as part of an updated presentation on the Mobile Internet:

The key takeaway from the slide is that we are moving towards a future in which we touch our computer screens and use our fingers. If I had to guess, 80% of people in the world use computers to consume content, not create it. Apple was the first to recognize this and the fact that the tablet represents a revolutionary product in regards to the new market application . Holding back on technology like the Apple A4, would have allowed other competitors to enter the tablet market, leading to the eventual cannibalization of MacBook product line anyways.
So, in the short run, the iPad likely cannibalizes sales of the MacBook. In the long run, Apple has momentum and early-mover advantage in the battle for the tablet market - a market that is becoming increasing importance as the general population moves further to the right side of the Mary Meeker slide.


