Simon Baker (Program Director)

Some simple numbers tell us some key things about the business cycles of the PC and phone industries and how many devices are in use. Some of these trends may be coincidental, but others are rooted in the pace of technological advance.

In the Old Testament, the agricultural cycle on which ancient life depended was seen as seven years — seven years of fat, followed by seven of famine.

In the modern device business, the key number tends to be ten, and then divisions thereof.

PC sales are currently going through a big boom, which started with the impact of the coronavirus as the new decade opened. Sales rose 12.9% globally last year, and 15.9% in Europe.

IDC has been ratcheting up its forecasts and now expects the PC market to grow 18% this year.

Then sales are expected to slow again.

A Regular Cycle

A decade ago, there was another boom and bust. Notebook sales had taken off in the years before, and then they fell back rapidly. And around 2000 there was also a rapid slowing in the industry after years of fast growth.

The reasons behind these ten-year cycles are all different. The earliest blip, around the millennium, was due to economic fallout from the 1998 economic crisis.

In 2010, the explanation was to do with competing technology. The market had risen in the years before as notebooks became lighter and more affordable, and as consumers could use cellular connection dongles to make them truly mobile. But then the boom turned to downturn as the LTE fourth generation mobile revolution took off and the smartphone market bloomed instead.

My research colleagues at IDC point to major global economic events as the key reasons behind these cycles as much if not more than economic cycles.

These would include, for the boom phases, the fall of the Berlin Wall at the end of the 1980s, and the growth of the Chinese market towards the end of the millennium; and on the negative side, the more conventional 1998 Asian economic crisis and the 2008 global financial meltdown. These combinations produced a short sharp slowdown after a longer boom.

That these cycles were approximately once a decade was more coincidental than anything else, and such 10-year cycles can’t be relied upon to happen again.

Every Decade a New Mobile Generation

But, as it happens, there is a regular decade-long cycle in the mobile industry linked to technology.

The introduction of new generations of mobile technology has come at roughly ten-year intervals — 2G (1991), 3G (2001), 4G (2009), and now 5G (2019).

That even holds true for “1G”, the little remembered Nordic Mobile Telephony — the first analogue mobile system “car mobile”, which was launched in the Nordics ten years before 2G, in October 1981.

These new mobile generations produce significant refresh cycles, as each adds important new capabilities to mobile communications.

Then there are other useful rules of thumb in both the PC and smartphone businesses that relate to the number ten.

Divide ten by two and you come up with the average lifespan of a notebook computer.

Divide by two again and two and a half years is the average life of most smartphones in many developed markets, including many countries in Europe.

The lifespans of the PC and smartphone are growing, and these yardsticks may not hold true in a few more years.

Also, they apply only to more developed countries, with the average lifespan of a PC and a smartphone being considerably longer in les developed areas.

Software Upgrade Cycles Are Less Important

One thing to note in these cycles is what they are not, and they are not software upgrades.

In PCs, the most technical cycle is the launch of new versions of Windows. This cycle is quite short, varying between two and three years (though five between XP in 2001 and Vista in 2006), but it has not produced big fluctuations in PC sales.

If anything, it is the sales bump when Microsoft withdraws support for a software version which is more important, which used to be after around 15 years, but in some cases has now shortened to less than a decade.

In mobile phones, new versions of Android have had a modest impact on phone sales, and with the introduction of online OS updates such upgrades have little impact on sales at all. While new versions of iOS are linked to the annual new models, it is the devices themselves that gain most of the attention.

The factor that has less of an impact than might be expected is the standard economic cycle. In the US, the average economic cycle is slightly less than five years, two-thirds of which is expansion followed by contraction.

The PC and phone industries have not consistently followed these waves, though there have been exceptions, such as the very deep economic contraction in 2008.

Over a half of the value of the PC market is accounted for by business purchases, and here the correlation with economic recessions is unsurprisingly stronger. 

Consumer markets, on the other hand, seem much more immune to recessions. Spending on mobile services appears to be a consumer priority, and rarely drops even in hard times.

Technology Cycles Look Set to Hold

Maintaining that the next sales cycle in the PC industry will again be a decade is a leap of faith. But technology trends look set to continue. Current planning suggests 6G, which will focus on bands yet further up the frequency spectrum in the millimeter wave above those for 5G, will again be introduced at around a ten-year step, around 2030.

The single most important technology trend in PCs, though not related to market size, has been very long lasting. Moore’s law, defined by Intel cofounder Gordon Moore, that the number of transistors in an integrated circuit (IC) doubles every two years, was first put forward in 1965, and it amazingly held true for more than a half century.

In recent years, it has appeared that the rule could not hold true for ever and that innovation was slowing down, and some commentators believe that it stopped being true by around 2019.

Even if the pace slows somewhat, miniaturization will continue. At the beginning of May this year, IBM announced that it had been able to reduce the spacing in integrated circuits down to 2 nanometres (two thousand-millionths of a metre). The technology, which includes placing of transistors in multiple layers, could be as much as 45% faster than the mainstream chips in many of today’s laptops and phones and up to 75% more power efficient, IBM said.

TSMC, the world’s most important IC producer, responded with the announcement that with partners including MIT it was working on a 2D technology which would allow it to go further and produce one nanometre ICs.

Such chips may be several years away in production, but they keep hope alive that Moore’s law may still apply.

Further out, there is some belief in the industry that AI may help designers move to additional interval reductions in ICs, though there is a boundary in the size of the atom itself, which varies in size from 0.1 to 0.5 nanometres.

These cycles of technological advance spur performance enhancements and the replenishment of devices and keep the momentum of the industry going, underpinning the pacing of the above commercial cycles that are evident in the market.

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