Personally, I believe change is good. If I look at the history of the computing industry, I can point to countless changes and paradigm shifts that led us to where we are today. However, most of the change we can point to have been more evolutionary than revolutionary. Most of the change we’ve seen hasn’t been disruptive—until now.
The PC industry is observing one of the most significant times of change it has ever seen. If I am being entirely honest with myself, I do not believe every company will survive this disruption, or at least continue in their current form.
The State of the PC Industry
For years, the PC industry, which we would classify to include desktop and notebook sales at a worldwide level, was growing. It was growing anywhere from 5-12% percent annually over the last 5 years, and in its early days it grew over 30% each year. I think many believed that someday every person on the planet would own one of these types of computers. For a point of reference, the PC industry was sustaining growth and for a brief time sold between 380 million and 400 million units worldwide for a couple of years. A good chunk of this was thanks to netbooks — low cost, highly portable computers. At one point in time, netbooks hit just over 30 million in unit sales. For most companies in the PC industry, things were good.
Then the iPad happened.
For the past two years, the emergence of the iPad has caused PC industry growth to slow and even decline. Last year, sales of desktops and notebooks were off between 5-7% depending whose numbers you look at. But perhaps the most telling was the 4th quarter, which traditionally is a strong quarter for PCs. Holiday 2012 PC sales were off over 10% worldwide according to our estimates. The story is not better for 2013, as our firm and many other analyst firms predict the PC industry to be in negative numbers again. To be honest, I believe the best growth years for desktops and notebooks are behind us.
Why the Tablet Destroyed the PC
The tablet is the culprit, plain and simple. The tablet accomplished something many in the PC industry did not see coming. Its form, function, and touch user interface adequately served the mass market needs uniquely. In fact, Steve Jobs said it best at the launch of the iPad: “The iPad is more intimate than a notebook, and more capable than a smartphone.”
Believe it or not, this is exactly what the mass market needed. The fact of the matter is that the PC as we knew it — whether a notebook or a desktop — had gotten to a point where it vastly over-served the mass market’s needs. The capabilities had outgrown the most common use cases of the mass market. Tablets, as it turns out, serve the most common use cases and needs of the mass market more than adequately.
It was consumers themselves who led us to this observation. Many consumers we observed and studied continually told us how the iPad had become their go-to device for most of the daily tasks they used to do on the PC. Often times this is simply browsing the web, checking email, and using a few key apps like Facebook. The bottom line is that hundreds upon hundreds of millions of consumers are finding exactly what they need in a tablet and using the desktop or notebook less and less — and only for a few specific things.
This emphasizes the point that the PC as we knew it is not going away; it is simply assuming a new role. One where it’s not needed on a daily basis by many and only exists to serve a few key tasks. One quick note on this point: Keep in mind that I am talking about the mass market. There are certainly segments of the market that need desktops or notebooks for work, or for pure heavy lifting tasks on a daily basis. My point is that this is a much smaller group compared to the vast majority of mass market consumers who have very simple needs for technology. The PC as we knew it, the one that was growing annually, needed the mass market to continue growing. That ship has sailed. Tablets have taken over the growth, role, and the relationship with consumers from the PC and I don’t see that changing any time soon.
So Where Do We Go From Here?
This does not mean that all hope for the PC is lost — quite the contrary. We are already seeing quite a bit of innovation in form and function from the industry. Many companies are attempting to steal attention back from the tablet by making their PCs more like tablets. This is creating both challenges and opportunities, but at the very least, PC vendors are being forced to think in new ways about their products. I think there is a role for many of these new PC form factors like hybrids and convertibles. I just don’t think they are enough to add growth to the traditional PC market. Even with these devices, the PC industry will still shrink, largely because people will hold on to PCs longer. The refresh rates needed for industry growth will shift to tablets, where consumers will refresh their purchases more often.
Where we go from here is the multi-screen world. In the age of the PC, it was all about one primary computing screen. Now it’s about many. Consumers will have two or three or four screens in their lives and they will want to use all of them as a part of their computing solution. The future is not about one screen; it is about many, and the sooner the industry embraces this reality, the sooner companies can stop worrying about the shrinking growth of one segment and begin thinking about the growth of another.
Bajarin is a principal at Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.