Analyst Report: Why the “PC” you buy in 3 years won’t be a PC


The early signs of a long-term trend are blowing in the wind: Traditional PC sales are down, smartphone sales surpassed those of PCs a year ago, and tablet sales are up. Yet even in the face of mobile devices’ becoming central to our lives, there are still naysayers who suggest tablets are a fad. I disagree. The “PC” you buy three years from now is more likely to be a highly mobile tablet than a traditional computer.

The facts and figures

Before looking at the future, it is worth a glance over our shoulders at the recent past to set a baseline. In 2011, sales of traditional laptops and desktops barely grew: A total of 352.8 million computers were sold in 2011 according to Gartner, just a 0.5 percent increase from 2010 sales. But the typically hot holiday quarter for PC sales actually experienced a decline of 1.4 percent from the prior year. Smartphones suffered no such losses. In fact, smartphone sales rose 61.3 percent for the year, says IDC, with a total number of 491.4 million shipments. Shipped phones aren’t the same as sold phones, but the difference between markets is staggering.

The smartphone sales growth is significant because handsets are no longer used solely for voice calls, which were once the primary driver for phone sales. Instead, tasks and functions once reserved for personal computers have been broken down into bite-size chunks of mobile smartphone apps, helping to propel handset sales. Don’t think of just the basics like email and calendar management; connected consumers with mobile devices are playing rich games, watching high-definition videos and even editing photos on handsets and tablets.

Those same aspects apply to tablets — a market that, outside verticals using Windows tablet PC devices, was unsuccessful until the Apple iPad launch in April 2010. Since then, Apple has sold nearly 40 million iPads, including 15.4 million in the most recent quarter alone. That compares with 5.2 million Mac computers sold by Apple in the final three months of 2011, just a third of the total number of iPads sold. And with the exception of Lenovo, Apple is the only computer vendor that actually grew year-to-year sales in the final quarter of 2011. Apple’s continued PC growth may be helped by more enterprise sales, a topic that my colleague Erica Ogg wrote about in detail back in December. Note that iPads too are invading corporate America as the BYOD, or “Bring your own device,” meme is beginning to be embraced.

What’s going on now that shows us the future

Fast-forward to today and there are additional key events taking place that support the growing shift away from traditional computing devices and toward tablets as eventual PC replacements.

  • Intel is no longer on the outside looking in. To date, Intel has been a nonfactor in the mobile revolution. The netbook was a one-hit wonder that has lost its luster. Now the chip giant has invested $300 million to “reinvent” the laptop market with its Ultrabook effort. While the company is pushing the “Ultrabook” marketing term hard, Intel is quietly preparing to finally enter the mobile market. Intel’s Medfield platform powering an Android 4.0 tablet impressed me at January’s Consumer Electronics Show: outstanding performance with eight hours of runtime or 30 days of standby. Medfield tablets can be nearly as thin as those powered by ARM-based chips, and the company suggests that 75 percent or more of all current Android apps can already run on Intel-based tablets. Given that Intel has missed the smartphone era, the company can’t afford to miss the opportunities in tablets and will be pushing hard in 2012 to get its chips inside Android tablets, as well as those running Windows 8.
  • Traditional PC activities are migrating to tablets. Prior to smartphones and tablets, all of our computing activities were done on . . . computers. That is obvious. But think about how many of those activities — particularly the common, core functions — are now possible on a tablet. Many of them are actually easier on a tablet, because the devices can be used nearly anywhere. Think email, web surfing, casual gaming, voice and video communications, e-book reading, movie consumption and more. Tablets are already offering a solid 80 percent of the PC experience in a lighter, more personal package that can run all day on a charge. The devices are often cheaper, lighter and don’t require a large financial investment for applications. Gone are the days of paying $50 to $100 or more for an optical disk with software for your desktop. The new successful paradigm is less-expensive apps that are quickly downloaded right on the tablet.
  • Tablet hardware is quickly maturing. I won’t suggest that the silicon inside a tablet running Android or iOS currently rivals or will rival that of the most powerful computers. But the ARM-based chips that power today’s tablets are following Moore’s Law, just as x86 chips have. That means processing power is roughly doubling while costs are declining. To wit: The year 2010 brought us 1 GHz single-core chips, which morphed into dual-core chips at faster clock speeds in 2011, without impacting battery life. Now it is 2012 and I am using an Asus Transformer Prime tablet: It has a quad-core processor along with 12 graphics cores. Most apps aren’t yet optimized to harness this power, but for those that are, it is a PC-like experience. See for yourself in this video of me gaming on the tablet. As hardware continues to mature on a regular 12-to-24-month cycle, software will attempt to catch up and take advantage of the increased power. That means some limitations of slow browsing or difficulties in creating content in today’s mobile apps will disappear over time. The gap between a basic PC app and a tablet app will continue to lessen as this happens.
  • Virtualization and remote access solutions will help. No matter how powerful tablets can or will be, there will always be the need for PC-specific software or heavy processing power. Perhaps you want to edit gigantic images with Photoshop or need the most arcane of features in a productivity suite. Maybe you work for a digital imaging shop that creates animated Hollywood movies. Tablet apps aren’t yet on par with those requirements. But there are plenty of tablet solutions that tap into the power of a remote PC. For example, GoToMyPC arrived not long after the iPad debuted and allows remote access to your Mac or Windows computer. OnLive is taking things a step further and removes your home computer from the equation entirely. The OnLive software connects the iPad to a remote Windows experience in the cloud on OnLive’s servers. There is no need to “own” a PC if you can rent an instance of one and control it through your tablet via a secured connection. Even Amazon’s Kindle Fire — which some don’t call a tablet — now has software available for a cloud-based Linux desktop in the cloud.

Some may read this and take away the message that the PC is dead, but that is not the case. The PC is — and will be for years to come — very much alive. Shifts such as the one I am describing don’t happen overnight. But for many, the shift will take place within the next three years. That is about two tech cycles for mobile hardware, and as a result, I expect much richer mobile apps by that time to bring more of a PC-like experience.

For developers out there, the easier money is likely in smartphones right now, mainly because of the broad target audience. Smartphones will continue to outsell PCs and tablets for several years, as only 30 percent of world has a smartphone at this point. But growing tablet momentum will help app sales going forward, and the time to jump into this market is now, not when it is crowded with “me-too” apps.

Hardware makers might seek the tablet gold rush, but those early to follow Apple have found little success. Research In Motion and Motorola have made little sales headway with their few devices, while Asian powerhouse Samsung is attempting a different strategy: blanket the market with multiple devices in different sizes ranging from 5.3 inches to 10.1 inches. Unfortunately for all the contenders, few, if any, have the supply chain management advantage that Apple enjoys. As a result, non-iPads priced like iPads have not gained a large following. Instead, lower-cost tablets such as the Kindle Fire and Nook Tablet have sold well by offering about 80 percent of an iPad’s functionality for 40 to 50 percent of the cost.

As mentioned prior, some enterprises are already embracing iOS and Android slates but mainly from a device-management standpoint. Companies not already doing so should be looking for iOS and Android developers to build internal apps in-house or ensure that their corporate web portals work as well on tablets as they do on traditional PCs. The computer shouldn’t be ignored, but at some point in the near future, it will become cost-effective to replace old or leased computers with the latest and greatest tablet.

And, of course, the digital designers out there using heavy CAD programs or video rendering software surely aren’t candidates to go PC-less in this decade. Some activities will long live on traditional computers, due to processing power needs or special input requirements. But when these folks go home at the end of the workday, I suspect even they too will be part of the tablet revolution.

Table of Contents

  1. Summary

Limited time offer! Become a subscriber and get reports like these, plus our collection of over 1,700 reports from world-class analysts for just $1495 a year.