There’s no question that the PC industry has taken a back seat to the tablet phenomenon. Many PC companies, with the exception of Apple, have not participated relevantly in the tablet discussion. Part of this is because many of them have been extremely focused on their core business, which is notebooks and desktops, but it is also due to the lack of a viable tablet platform. Android is doing well with 7-inch tablets and has had some success with 10-inch models due to Samsung’s efforts. Other than that, there are very few Android tablet volume success stories.
Many in the PC industry were waiting for Windows 8 to hopefully give them a fighting chance with tablets. It’s becoming clear, however, that Windows 8 is giving vendors an opportunity to invest and compete in an entirely new category with hybrids and convertible PCs.
At this years CES I’m expecting to see a wealth of innovation around the PC form factor. I have written about hybrids often here at TIME and the examples we have to date are just the tip of the iceberg in terms of the exciting innovations around the corner with respect to this new category. Truthfully, the PC industry needs the spark of innovation from this new category to help stabilize years of declining PC sales.
The PC industry has remained relatively steady in its annual worldwide sales volume. There were a few years when annual worldwide sales eclipsed 400 million, but as of late, our industry average has been in the 350-380 million range. From our firm’s perspective, we don’t see this changing, meaning we don’t see the pie or total addressable market for traditional PCs growing. All of the recent growth from an industry standpoint is coming from tablets.
The reality is that the PC industry built its business around a predictable hardware refresh rate of between 2-3 years. Now the average time consumers are holding on to their notebooks is 4-4.5 years. Enterprises refresh a little sooner that than, but the BYOD trend is impacting refresh rates and will be in line with the consumer market. With a static and non-growing PC market the vendors need something that helps them participate in the growth. That’s where they hope hybrid and convertible designs come in.
Like the tablet, the hybrid and convertible designs represent a fresh take on personal computing. Each of the three designs I just mentioned excels at certain tasks or jobs the others don’t. The traditional clamshell notebook performed a wide range of tasks because it was our only option. It did all our computing tasks even though it may not have been the best design for those tasks (something that the advent of tablets and now hybrids and convertibles are making clear). These new form factors bring new use cases and new usage models to the table in ways the traditional PC never could, and that is exactly why these new form factors are important.
For new categories to be worth investing in they need to do what I call “enable the new.” What I mean by this is that innovations worth bringing to the masses enable something new — they bring something to the table that is new, fresh and useful. In this case tablets, hybrids and convertibles are already exciting the market because they bring new ways to compute to the tablet. Whether that is consumer, share, work, play, learn, etc., this new hardware gives us a new and better way to do these things.
This is why I never believed the Netbook category would stick. These devices didn’t enable the new but rather enabled the cheap. Our firm has stood firm on the philosophy that cheap products yield cheap experiences (i.e you get what you pay for) and most consumers are willing to pay for things they value. Netbooks were simply cheap PC terminals where new hardware like tablets, hybrids and convertibles is actually delivering new value propositions in the realm of personal computing.
The market will value things they find valuable. Notebooks drove the maturity of the PC industry but I am slowly concluding that the mass market is valuing notebooks less and that value is shifting to tablets. The PC industry needs to capitalize on this shift in market sentiment by focusing the bulk of its efforts on the form factors that actually enable new experiences and new use cases.
That said, a word of caution: Not all of the designs we see at CES or that come to market will stick. We’ll see a variety of ideas as vendors experiment to see which designs stick. This is an important part of the maturity of a new category. In fact it is this point that makes me the most excited about 2013, and it is also the one that will keep me the busiest as an industry analyst this upcoming year.
For all of us in the industry, we’re in for some exciting times ahead. Much has changed and will continue to change in the PC industry. Those who understand and embrace it will reap rewards.