Simon Baker (Program Director)

PC sales are up on the up and manufacturers are having trouble meeting demand. If the PC is to meet its potential and keep growing, it needs to become much more like the smartphone.

The global PC market has come storming back over the past year with the coronavirus lockdowns, and PC makers are currently struggling to keep up with demand. In its Worldwide Quarterly PCD Tracker,

IDC has upped its forecast for this year by 20% over what it had foreseen three months ago. The revision would be more than that if shortages in chip supply were not expected to hold down production.

In the ten years before the current boom, the PC market had stalled, while sales last year reached around 300 million. But though this is a turnaround, the numbers are very small compared to the potential of the PC.

In contrast, shipments of smartphones are around 1.3 billion a year, according to IDC’s Worldwide Quarterly Mobile Phone Tracker.

The consumer market for PCs is in relation even smaller, as more than a half of PCs go to companies, while five percent of smartphones do. It is clear the has PC lost out to the phone.

The PC market matured globally before its time, but there is a huge untapped market, mainly in middle income and poorer countries, which the PC has yet to reach. If it becomes more like the phone, maybe it could do much better.

Laptops are simply rather expensive products, and out of the price range of households in poorer countries.

Though the average price of a consumer laptop fell rapidly from 2000, this bottomed out above $650 retail before tax in the middle of the last decade and has risen again slowly according to IDC statistics, as technical specifications have risen.

More PCs need to be in the hands of more consumers, especially in the developing world.  But for that to happen, PCs need to become cheaper and consume less power.

There are some important industry trends heading in that direction.

Bringing the PC Closer to the Phone

Copying the smartphone’s success largely means copying the phone. One such trend is the increasing use of ARM processors on PCs. The lower power consumption of ARM chips has been essential to smartphones, but for years PCs have been powered by 64-bit processors while Intel has dominated the industry.

ARM processors also generate less heat than Intel and equivalent x86 processors, which simplifies design. It takes away the need for cooling fans and allows batteries to be smaller and power up PCs longer, which is important in countries without consistent sources of electricity and where users may rely on solar panels or car batteries.

ARM is coming on MacBooks, with Windows on ARM, and importantly for the lowest price segments, on Chrome, which was designed to work on both ARM and x86 architectures.

Secondly, Google’s ambition with Chrome OS should make more affordable laptops more widely available. Chrome demands a lower technical spec than Windows. As yet, Chrome is mainly a U.S. phenomenon, but it has potential in low-income countries; the average sales price of a Chrome notebook globally is $331, with the cheapest models around $200, less than half that of a Windows notebook, and only a third again above that for an Android smartphone.

A third move that is bringing laptops and smartphones closer together is Qualcomm’s move into PC processors. No company has more expertise in minimizing power consumption while maximizing data throughput on mobile devices. Qualcomm is largely a top end player, but any advances will percolate down to cheaper products.

A fourth area is hybrid products. “Detachables” — tablets with keyboard — have been around for a while, but they tend to be pricey ultra-lightweight premium products. They could, however, become more budget. TCL is one company that offers cheaper alternatives.

Common Brands

Another important factor in a new democratization of PCs is brands.

Despite the smartphone being in some respects a small and more mobile PC, most attempts by manufacturers of the former to move into the latter have not worked well. The Taiwanese PC makers ASUS and Acer have been making smartphones for years, but never gained much share. Lenovo’s move into smartphones under its own name foundered, and it has instead fallen back on the Motorola brand which it purchased from Google.

Moves in the other direction have not fared much better. Samsung’s move into laptops, was curtailed in 2014. Making Windows based PCs is a low margin business and has been widely perceived as mature.

More recently, however, phone makers have started taking a second look. Samsung is progressively expanding where it sells notebooks again. LG may enter the business, despite its withdrawal from phones. Huawei has launched a range of laptop PCs, and so has Xiaomi. These companies’ size and reach and marketing budgets can expand the market.

In combination these changes could have a considerable effect on the PC market.

Digital Divide

How much potential there is for PC sales in the emerging world is shown in a few figures. The U.S. remains a much bigger market for PCs than China, and nearly nine times bigger than that in India. Less than eight million notebooks were sold in India last year.

The same gap is seen in the education sector. Global PC purchases by state and private educational institutions were around 20 million last year, well up on 2019, and overall education will account for close to 7% of total notebook shipments this year. Educational sector purchases of tablets were close to those of PCs, according to IDC figures.

But among those PC shipments to education there is the same rich country bias — Canada accounts for more notebooks than the whole of the Middle East and Africa.

Up a Tree With a Phone

One of the most enduring images of coronavirus pandemic has been pictures of students in India, Indonesia, Russia and elsewhere, sitting up in trees on or hilltops or in other unexpected spots to find a mobile signal to enable them to continue their school or college work.

Beyond the spot where they have found a signal, the most striking thing about the students in these pictures is what they were using. Millions of them have been receiving class work and trying to process all of this on their mobile phones.

Smartphones, separate from their communications functions, are essentially consumption devices. Just try to work on an Excel sheet on one. Distance learning demands something more — a device with a keyboard and relatively sophisticated software — in other words a PC of some sort.

Not all the ways in which the PC is becoming like the phone are applicable to the lower/middle income world. MacBooks will remain too pricey for most, and Google’s emphasis on the cloud in Chrome will be a challenge for instance in Africa, where mobile data is relatively expensive.

But it is through the PC becoming more like the phone that the computer industry has the most chance of taking a second wind and making more of an impact outside the developed world.

 

To learn more about our upcoming research, please contact Simon Baker, or head over to https://uk.idc.com and drop your details in the form on the top right.

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