Five disruptive forces to challenge PC makers

Worldwide PC shipments are on pace to total 352.4 million units in 2010, a 14.3 per cent increase from 2009, according to the latest preliminary forecast by Gartner, Inc., revised down from Gartner's previous PC shipment forecast in September of 17.9 per cent growth.

Worldwide PC shipments in 2011 are forecast to reach 409 million units, a 15.9 per cent increase from 2010, but also lower than Gartner's earlier estimate of 18.1 per cent growth for 2011.

"These results reflect marked reductions in expected near-term unit growth based on expectations of weaker consumer demand, due in no small part to growing user interest in media tablets such as the iPad," says Gartner research director Ranjit Atwal. "Over the longer term, media tablets are expected to displace around 10 percent of PC units by 2014."

While Gartner does not regard the current dynamics in the PC market quite yet as an inflexion point, its analysts do perceive several disruptive forces converging that will weaken the market moving forward.

"PC market growth will be impacted by devices that enable better on-the-go content consumption such as media tablets and next-generation smartphones," comments Raphael Vasquez, another research analyst with Gartner. "These devices will be increasingly embraced as complements if not substitutes for PCs where voice and light data consumption are desired. It is likely that desk-based PCs will be adversely impacted over the long-term by the adoption of hosted virtual desktops, which can readily use other devices like thin clients."

"PCs are still seen as necessities, but the PC industry's inability to significantly innovate and its overreliance on a business model predicated on driving volume through price declines are finally impacting the industry's ability to induce new replacement cycles," observes Gartner research director George Shiffler. "As the PC market slows, vendors that differentiate themselves through services and technology innovation rather than unit volume and price will dictate the future. Even then, leading vendors will be challenged to keep PCs from losing the device limelight to more innovative products that offer better dedicated compute capabilities.

"In the near term, many consumers and businesses will continue to refrain from buying PCs, as they collectively rebuild their finances in the face of slower income growth, weaker employment gains and a cloudy economic outlook. Over the longer-term, users are likely to slow PC replacements and extend PC lifetimes as they turn to other devices as their primary computing platform."

Gartner analysts have identified disruptive five dynamics currently challenging the PC industry:

1) Emerging Markets Continue to Drive Growth

While Gartner expects a continued upside in their emerging market forecast, leading to emerging markets gaining more than 50 per cent of the total worldwide PC market by the end of 2011, mature markets will face mounting challenges. Furthermore, they deduce that in emerging markets, there is good chance that consumers will simply leapfrog PCs and move directly to alternative devices in the coming years rather than following the traditional pattern of purchasing a PC as their first computing device.

2) The Consumer Wallet Continues to Shrink

Home mobile PCs have suffered the steepest downgrade with shipments in mature markets expected to be significantly weaker. Consumers in the U.S. and Western Europe continue to postpone purchases in the face of financial and economic uncertainty. However, Gartner says that the bigger issue for PCs in the home market is consumers temporarily, if not permanently, forgoing PC purchases in favor of media tablets.

3) Challenge of Emerging Devices

Media tablet capabilities are expected to become more PC-like in the coming years, luring consumers away from PCs and displacing a significant volume of PC shipments, especially mini-notebooks. Media tablets are rapidly finding favor with PC buyers who are attracted to their more-dedicated entertainment-driven features and their instant-on capability.

4) Extended Life Cycle Impact

The ascent of emerging devices will have an important indirect impact on PCs the extension of average PC lifecycles. The effect of this ascent will be to spread traditional PC functionality over a variety of complementary devices. As this happens, analysts foresee users extending the lifetimes of PCs because there will be less need to replace them as often.

5) Uptake of Thin Clients

Hosted virtual desktops (HVDs) are not expected to earnestly impact mature professional markets until 2012, at the earliest. Longer term, users that adopt HVDs to access their compute capabilities will do so predominantly by using refurbished PCs and thin clients. These alternative devices will displace new PC units, thereby reducing expected future desk-based shipment growth.