Maybe you have heard about the death of the personal computer market. If you think you have heard it before, you might want to look much closer now. Tablets and smartphones are not just the draw. When you consider how the cost of a smartphone or tablet can be much lower with very powerful computing, you might wonder how the PC market can remain relevant outside of the business markets.
Now IDC has a new forecast, showing that tablets will outpace PCs in shipments during the important fourth quarter of 2013. On an annual basis, IIDC is now predicting that tablets will out ship PCs on an annual basis by 2015.
IDC showed that the worldwide smart connected device market (PCs, tablets, and smartphones combined) is expected to grow by some 27.8% in 2013 versus 2012. That sounds high but it is actually just under the 30.3% growth that was seen in 2012. The growth drivers are tablets and smartphones, and the PC outlook has been lowered by 10% for 2013.
The worldwide smart connected devices total value is expected to grow to 10.6% to $622.4 billion in 2013, of which $423.1 billion will come from the sub-$350 smartphone and sub-$350 tablet segments combined. Unfortunately for device and component makers, that growth is expected to slow down to about 3.1% in 2017 because of the low-cost smartphones and the white box tablet market. One quote really stood out here:
"Over the next 12-18 months, however, we believe the larger smartphones, commonly called 'phablets', will start to eat into the smaller-size tablet market, contributing to a slower growth rate for tablets."
Dell Inc. (DELL) and Hewlett-Packard Co. (HPQ) find themselves at an interesting crossroads. Neither is really in the smartphone market. Neither is noted with any respect in the tablet markets. So the two will have to fight over the desktop and laptop markets, at a time when Lenovo, Acer, and others are eating away at their dominance because of price. Dell is going private so that it can be less public and less transparent as it tries to gain position again, and H-P is unimpressive enough that it was just ejected from being one of the thirty DJIA stocks.
The reality is that Microsoft Corporation (MSFT) has its work cut out for it, and for whomever takes over as CEO for Steve Ballmer. The desktop PC market growth from 2013 to 2017 is expected to be in the red at -8.4%, shrinking from 134.4 million units this year to 123.11 million units in 2017. The desktop market is dominated by Microsoft. The portable PC market, also counted in the total PC sector, is also dominated for now by Microsoft and IDC sees total 2013 shipments of 180.9 million units in 2013 growing by 8.7% up to 196.6 million units by 2017.
IDC now expects tablet shipments to pass up global PC shipments of PCs and laptops combined in the fourth quarter of 2013. While total PCs shipments should still exceed tablet shipments for the full year, IDC is now forecasting that tablet shipments will exceed total PC shipments annually by the end of 2015.
The tablet market is bringing huge opportunities for Apple Inc. (AAPL) and Google Inc. (GOOG) alike. IDC expects the tablet market to grow some 78.9% from 2013 at 227.3 million units up to some 406.8 million units in 2017. That market share is expected to grow from 14.6% in 2013 up to 16.5% in 2017.
Where the real story lies is in the smartphone market growth. This is expected to be over 1.01 billion units in 2013 and growing some 71% up to 1.73 billion units by 2017. Its market share at the same time is expected to grow to 70.5% versus 65.1%.
Again like tablets, this is also a battle being fought largely by Google Inc. (GOOG) for its Android operating system and Apple Inc. (AAPL) for its iPhones. Apple is going after more smartphone sales, but Google's lower-cost Android platform is making it the leader. Whether or not Nokia Corp. (NOK) can help Microsoft Corporation (MSFT) gain any traction for its Windows smartphone remains to be seen. This simply remains yet another challenge for whomever takes over as CEO of Microsoft.
On the smartphone market, IDC sees these high volumes continuing. The group projects smartphone shipments will be roughly 1.4 billion units in 2015, accounting for a whopping 69% of the entire smart connected device market globally. As a reminder, much of the emerging market and developing market users who are on the internet have actually never owned a personal computer.
Perhaps the biggest risk, and opportunity, is for the likes of Intel Corporation (INTC). Intel has dominated the PC market for years now, but it has been almost completely absent during the rise of smartphone and tablets. The processor giant is now getting its processors small enough and to the right speculations for heat and power use, but Intel will have to prove itself rather than get to rest on its laurels from the PC and server markets.
The real winner may simply be ARM Holdings PLC (ARMH). ARM is fabless, and licenses out its designs for processors. For every smartphone that ships out, ARM collects a royalty on a large portion of the units shipped out. ARM is worth some $22 billion already, but that is small in the wake of other processor and chip giants. Analysts see ARM's sales rising about 20% in 2013 and up another 18% to $1.3 billion in 2014.
If you want to see how and why the expectations for a decline in the importance of PCs is taking shape, it is no accident that hard disk-drive markets and storage makers have been slowly moving into acquiring companies in the solid-state drive market and also into the systems-on-a-chip designs. They see the writing on the wall too.
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