The popularity of e-book readers already is on the decline as tablets grab more market share and absorb e-reader technologies, according to an IHS iSuppli Consumer Electronics Special Report.

From 2008 to 2010, yearly e-book reader shipments rose from 1 million to 10.1 million, peaking in 2011 with 23.2 million units. But their totals fell 36% to 14.9 million units in 2012, with another 27% contraction and 10.9 million units expected by the end of 2013. By 2016, IHS says, e-readers will tally 7.1 million units.

“The rapid growth, followed by the immediate collapse, of the e-book reader market is virtually unheard of even in the volatile consumer electronics space, where products have notoriously short life cycles,” said Jordan Selburn, senior principal analyst for consumer platforms at IHS.

“The stunning rise and then blazing flameout of e-books perfectly encapsulate what has become an axiomatic truth in the industry: single-task devices like the e-book reader are being replaced without remorse in the lives of consumers by their multifunction equivalents, in this case by media tablets,” Selburn explained.

“And while other uni-tasking devices like digital still cameras, GPS systems, and MP3 players also face similar pressures and battle dim prospects ahead, all have had a longer time in the sun than e-book readers, demonstrating even more painfully the depth of the e-book reader’s fall,” Selburn said.

The Eastern European and Russian markets for e-book readers remain strong, though. Potential opportunities for e-readers also exist in regions with ongoing power issues like Africa and India where their power efficiency makes them attractive. Sales prospects also could improve if prices drop further.

Tablets, meanwhile, will reach 120 million units in 2012 with 340 million systems expected by 2016, IHS says. Yet e-readers still are much less expensive to build. Amazon’s 7-in. Kindle e-reader from late 2011 has a total bill of materials (BOM) cost of $84, while the recent Asus Nexus 7 tablet has a $153 BOM.

To maintain their market, IHS says, e-readers will continue to sell at manufacturing cost or less with the help of operator subsidies. The Txtr Beagle reader, which includes a 5-in. screen, may sell for as little as $13 in 2013. E-reader manufacturers that aren’t content providers will face particular pressure to minimize costs.

Amazon can recoup its losses through the sales generated by e-books and other content available through its online store. Plus, Amazon’s Kindle e-reader has evolved into the Kindle Fire media tablet.

The e-reader’s decline will benefit media tablet suppliers along their supply chains. The market for tablet displays, for instance, will double from 2011 to 2014, reaching almost $10 billion. Semiconductor shipments for tablets will see similar growth, with total semiconductor consumption by tablets topping $20 billion by 2016, making the area one of the most lucrative opportunities in the chip industry.