Rebooting the PC industry: Tablets force a shift

July 19, 2011 By JORDAN ROBERTSON , AP Technology Writer

(AP) -- The personal computer industry needs a jumpstart - and it's counting on a rescue from emerging markets and a late-to-the-party push into tablet computers.

The U.S. and European PC markets have entered a dangerous new phase: Fewer people are buying new PCs because of economic anxiety, market saturation and the rise of seductive such as Apple's iPad. More signs of strain are expected as PC makers and their component suppliers begin to disclose this week.

Make no mistake: The PC is still the backbone of the digital world, powering e-commerce, and more. It is a fixture in homes and businesses in industrialized countries. More than 1 million PCs are sold every day, and the industry is bigger than ever.

But worldwide sales have slowed in recent years. The U.S. and European markets have fared the worst, suffering lately from declines compared with the previous year. Market research firms IDC and Gartner Inc. said last week that PC shipments worldwide grew at just over 2 percent in the second quarter, short of both firms' expectations.

One of the most urgent concerns is that the PC has become ubiquitous in many markets. That has presented the industry with a classic business problem: how to find new ways to sell an established product.

Although it's true that computers need to be upgraded regularly, businesses are only starting to spend money again as the economy slowly recovers. Consumers are updating their machines less often, spending their money instead on the latest handheld gadgets.

Apple CEO Steve Jobs has promoted the changes as a sign we've entered the "post-PC era." Technologists have thrown around that term for a decade in what turned out to be premature predictions, but the characterization may be coming true now.

"This is a time of intense change," said Sarah Rotman Epps, a Forrester Research analyst who has studied the evolution of consumer technology. "New competition for PC manufacturers makes it just really, really hard to make a profit."

As a result, PC makers are looking to emerging markets to boost sales.

The new strategy was evident at Intel's recent investors' conference, where the company's CEO, Paul Otellini, unveiled a map that identified where PC growth is expected to be strongest in coming years.

The U.S. and Europe were conspicuously not highlighted. Otellini gestured instead toward places such as Brazil, Russia, India, China - the so-called "BRIC" countries - as well as Mexico, Venezuela, the Czech Republic, South Africa and Turkey. All are expected to experience double-digit percentage growth.

The message: The world's leading computer chip-maker and its industry allies have no choice but to launch a marketing attack on foreign shores.

PC sales are decelerating in the U.S. because the same technological advances that fueled the PC industry's rise - faster processors and lower costs every couple of years - are now benefiting the devices that are usurping it. Consumers can now use smaller gadgets to do many of the same things they once did with PCs, such as surfing the Internet, storing photos and sending e-mail. Apple even boasts that users can edit home movies on an iPad.

Indeed, consumers' increasing demand for tablets is a looming threat. Some 50 million tablets are expected to be sold this year, and that could double to as many as 100 million next year, according to various estimates. Although that's still small compared with sales of 362 million PCs this year, as estimated by IDC, the PC industry has reason to worry because of how quickly the tablet has been able to claimed such a large corner of the market.

Goldman Sachs calls tablets "one of the most disruptive forces in computing in nearly three decades." It predicts that as many as 21 million people will buy tablets instead of laptops this year, jumping to 26.5 million next year.

In recent quarters, corporations have buoyed much of the spending on PCs. That likely continued in the April-June period, but the drag from consumers is expected to be substantial. Intel Corp., which makes 80 percent of the world's microprocessor chips, issues financial results on Wednesday. Advanced Micro Devices Inc., its smaller rival, and Microsoft Corp., whose Windows software runs on most of the world's PCs, report on Thursday.

Intel and its PC manufacturing customers are hustling to adapt.

Intel, for example, is working on chips that are less power-hungry so that they're more useful in battery-dependent mobile devices. The company says it has signed deals for some 35 different tablet and tablet-PC hybrids to use its chips. Intel is pursuing the smartphone market, which until now has been controlled by a competing chip design developed by U.K.-based ARM Holdings PLC.

Intel, a linchpin in the creation of the PC market, has experimented with putting its chips into non-PC devices before, only to retreat under pressure to focus on its core business. Now investors' interest has flipped, and Intel finds itself under pressure to move faster into smartphone and tablets.

The message isn't lost on the company: The bulk of Otellini's recent sales pitch to investors centered on Intel's efforts to expand into the new technologies.

The consequences for not failing to act have already been severe. AMD's board forced out CEO Dirk Meyer in January, largely because the chipmaker lacked a defined mobile strategy. The company is still without a permanent CEO.

The corporate hand-wringing, analysts say, shows the magnitude of the industry's transformation.

"These changes are a fundamental shift in computing behavior," said Forrester's Epps, noting that computing is now an always-on activity. "The main shift for PC companies that will survive is they need to shift their focus from computers (as) the device to computing (as) the behavior."

Many PC makers such as Hewlett-Packard Co., Dell Inc. and Lenovo Group Ltd. have responded by designing tablets of their own.

None of the new tablets have become a sensation like the iPad, which has sold 20 million units since it went on sale in April 2010. Apple Inc. now sells nearly twice as many iPhones as it does Mac computers. The company is on track to make more money from iPads than from Macs by the end of the year.

"If you have a tablet, you don't turn on the PC as much," said Brian White, a Ticonderoga Securities analyst who covers the PC industry. "If you have a tablet, you may not bring your notebook on a trip. It's only going to get stronger, and tablets are going to get better and better. This is a legitimate threat to a PC maker. They have to have both, and unfortunately most are behind in the game."

Even if current market projections become a reality, there still would be a wide gulf between the $35 billion tablet market and the $250 billion PC market. The PC won't become obsolete any time soon because it's still the device of choice for creating the content that consumers increasingly access with their smartphones and tablets. At least for now, PCs are also needed to store data and to load information onto smaller devices.

How much of the computer market it will be able to command in the future, however, is an open question.

Explore further: PCs sales in 2010: Tale of the Tablet


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not rated yet Jul 19, 2011
Maybe its due to the fact that while the apparent processing power of comuters have increased over the years the actually productivity has not increased. Why do computers take so long to turn on? No change in decades. Why do applications crash so often, why do computers slow down after a year or two of use etc etc.

All these issues kill modern pc's since they are all but non existant for tablets and yet many people do the same functions on a tablet as a desktop pc.
not rated yet Jul 19, 2011
Mobile market has nothing to do with desktop computer market. It doesn't take a genius to figure out that as more people own a computer less people are left to buy them.

But if you want to compare apples to oranges. New processors have had no speed increase, only extra features that are rarely if ever used by the majority of consumers. New video cards have slowed greatly in the speed increases. Sound cards are still rising, but it takes a computer analysis to spot the difference in quality at this point. The only real major avenue advancement available currently is networking, but not much is being done with that, why are we still on RJ45 or worse the regression called 802.11 wireless when there are much faster and more reliable alternatives (firewire and fiber optic for instance).
not rated yet Jul 19, 2011
@Bob_Kob, the reason that PC's have not got faster is mainly down to the huuuuuuge bottleneck known as the hard drive.
The more time goes on, the more of a bottleneck it is. 6 years ago a good hard drive would read about 40MB/s, now a good standard one will read about 100MB/s, hardly any difference.
Get yourself the latest SSD (>500MB/s) and THEN you notice the difference. Booting takes <20 seconds, and your PC is finally 'freed from it's chains'.
In general, unless you play games, a PC from 5 years ago would probably do just fine if you don't include an SSD.. You don't NEED the extra processing power.
not rated yet Jul 19, 2011

In general, unless you play games, a PC from 5 years ago would probably do just fine if you don't include an SSD.. You don't NEED the extra processing power.

This is same what came to my mind first. For home use games are (atleast from my pov) only thing what have gone forward and actually uses what extra you can get when you change that old computer to new one. And then comes that question that how much do I really want to pay to play that 1 or 2 new games.
not rated yet Jul 19, 2011
You spend a bit more on hardware to play games on the PC instead of the console, but you can save a lot more software wise in terms of deals you get on digital download services like Steam which have great reductions on packages of games. Recently playing Assassin's Creed 2, and I couldn't imagine playing the game with anything other then a keyboard and mouse.
2 / 5 (12) Jul 19, 2011
Tablets are only good for casual browsing - ie read only activities & basic interaction: surfing webpages, watching vidoes, photos, updating facebook etc.

not rated yet Jul 20, 2011
I'm sitting on my couch reading Physorg with my laptop. If I had a tablet, I'd be using that.

I take my iPhone everywhere. The percentage of time I use it as a phone vs a portable computer is very small. BTW, in the 2 years I've owned it, I haven't bought a single app, the free ones do everything I need.

Clearly, the existence of a variety of platform options changes usage patterns, and hence demand, for PCs. I still use a desktop and a laptop every day, but I'm less inclined to buy new ones... I still run XP on the desktop.

Add cloud computing to the mix and I don't need big processing power locally.

Tablet and mobile gaming is catching on. That will drive mobile device manufacturers to improve performance.

Already, some tablets are dockable, making them viable substitutes for desktops and laptops in some cases. Wireless, large format, high def displays will also be driven more frequently by mobile devices.

We are, indeed, moving into a post-PC era. That's a good thing.
not rated yet Jul 20, 2011
CreepyD - You are so right. Back in the 90's and early 00's, computers would double in speed every few years. That slowed to a crawl around 2005 or so. Now they just add more cores, which is nice for multitasking, but the speed of the computers (CPU, RAM or whatever) rarely exceed 3.0 ghz.
And you mentioned Hard Drives, the monkey on the back of every computer and server in the world. We need cheap, reliable SSD's that dont double or triple the cost of a computer! Most people dont understand that computers are only as fast as the SLOWEST part. So when you have an 8-core super computer with 16gig of 1333mhz RAM, it still has to feed data from a slow hard drive, effectively running at 100mb (or mhz, if you parallel the bytes to cpu cycles). Also, how fast do computers need to be, anyway? People these days are replacing thier computers because they HAVE TO, not because they want or need to.
not rated yet Jul 20, 2011
There are so many reasons why tablets are catching on. The most promising development I see is that the interface is becoming more "Natural". I was talking with my buddy the other day about how the movie "Minority Report" had that big computer that was controlled with gloves and hand gestures. Not great for office work, but awesome for gaming and other applications too. Tablets bring us closer to that, you just need the touchscreen and your wits, not a huge pile of accessories, like with a PC. Every child in the world touchs the TV, now that innate behavior actually does something.

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