Computing Redefined: A Smart Connected Devices Forecast

Bob O'Donnell / February 4th, 2014

The market for smart connected devices is changing and it’s doing so at a rate that’s even faster than most people realize. In the process, the whole conception of what computing is, where it happens and even what means is changing and evolving.

Let me put it another way. This year, my firm TECHnalysis Research predicts that the 2014 shipments of large smartphones (those with screens 5” and larger—commonly called “phablets” but perhaps better coined “mobile connected devices”) will far outsell both small tablets (those with under 8” screens) and even notebook PCs. Specifically, we are forecasting that worldwide phablet unit shipments will reach approximately 240 million in 2014 versus 173 million notebooks and 158 million small tablets. That’s a seismic shift that will have profound implications on branded device vendors, component suppliers, ecosystems, applications and app development, and even regional influence. We’re going to see an increasing influence on mobile operating systems, developing markets and computing devices that fit into your pants pocket or small purse.

In the US, the story isn’t quite as dramatic, as large smartphones have been a little bit slower to reach mass appeal, but even by 2015 we expect large smartphones to outship notebooks in the US by a margin of 37.5 million to 35.9 million and by 2017 we expect them these mobile connected devices to outsell small tablets in the US (41.9 million versus 41.5 million).

The charts below show our view of the entire smart connected devices market (the combination of PCs, tablets and smartphones—it’s a term I coined while at IDC), split by the six key subcategories: notebook PCs, desktop PCs, small tablets (under 8”), large tablets (8”+), small smartphones (under 5”) and large smartphones (5”+). The top graph shows the WW numbers and the second one shows the US numbers.

WW SCD Shipments by Type, Feb. 2014

US SCD Shipments by Type, Feb. 2014

 

In addition to the major transitions in device influence show by these graphs, one of the other key takeaways is that the total smart connected devices market is starting to stabilize and show much more modest growth, especially in the US. The fact is the market for these device categories are all starting to saturate, as people hold onto their devices longer and the need to upgrade is reduced. PCs were the first to suffer this fate, but we believe it will move over to tablets and even smartphones by the end of the 5-year forecast period—again, especially in the US.

As a result, the only way vendors can continue to grow within these categories is to steal share from one another. We believe this is one of the many reasons Apple is likely to enter the large smartphone market later this year. Demand for these devices is particularly strong in the regions where the company wants to grow and even in the US, it will be necessary to help them maintain their share.

The device industry has been on a treadmill of seemingly never-ending growth for decades, but we believe that era of unimpeded growth will be coming to an end by the end of this decade. Of course, many device vendors, ecosystem providers and supply chain partners will transition over to wearable technology and other yet-to-be-discovered product categories in the interim in order to compensate for this change. However, this maturation of core computing devices into a more mature, slower growth industry is bound to bring with it some other unexpected changes that promised to keep this space an exciting and interesting one to watch.

If you’re interested in seeing the highlights of the new TECHnalysis Research forecast document (which covers significantly more than I could cover in a single column), you can download a free copy at www.technalysisresearch.com/sample_research.html.

Bob O'Donnell

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.
  • Majipoor

    “That’s a seismic shift”

    Come on: large smartphones are mobile phones and the mobile phone market is a LOT bigger than the computer market and always was. There is no seismic shift there, only a re-balancing of the large smartphones and small tablets markets where they overlap (mostly as portable video/TV devices).

    Moreover, at some point, if you add the phone feature to a small tablet it becomes a (very) large smartphone: the point is that in the 6-7″ display size range, large smartphones and small tablets are mostly the same and it is meaningless to consider them as belonging to different markets.

    I think that you have a market for small devices you can take with you every time, everywhere, with voice capability and a market for bigger mobile devices mostly aimed at content consumption and “real work”. In the first market, you have small smartphones and probably soon “smart watches” (wrist devices). In the second market, large smartphones, tablets and laptops.

    Those markets are indeed evolving quickly currently because large smartphones and small tablets are quite young segments and there is still no smart watch available. But within a few years, the mobile device market will mature and then there will be a place for everything from smart watches to big laptops. Only companies which do not cover all segments are in trouble (mostly traditional laptops manufacturers such as DELL or HP) while other companies will just re-balance their portfolio.

    Nothing seismic there: only the natural evolution of several converging markets.

    • Space Gorilla

      Well said. Bob has written before about phablets, if I’m remembering correctly. In a previous comment thread we tried to nail down what sales of phablets actually were (not shipments or projections, *sales*) and the consensus was that phablet sales are quite small right now.

      • Majipoor

        Samsung and others make so much marketing for flagship big Galaxy S and Note devices that many consider such device as being the norm which is indeed by far not the case.

        Phablets are definitely over hyped (I guess because Apple does not have a big iPhone yet and thus it is an easy way to be “better than the iPhone”): while there is for sure a significant market for “small phablets” (5″), I think the huge 6″ smartphones are just a fad or a very small niche.

      • Bob O’Donnell

        Actually, according to my research as well as that of other firms, the worldwide phablet sales in 2013 were over 150 million units (I pegged them around 164 million), with only 15% of those being in the US. That’s far from small….

    • Bob O’Donnell

      My argument is based on the principle that large smartphones are not mobile phones, but mobile computing devices and therefore their growth past smaller tablets and notebooks does represent a major shift. Application developers want to create solutions for the largest markets they can and, based on these market transitions, I think you will see shifts in where, how and for what devices innovative applications get developed.
      Plus, the evolution of these devices also adds to the increasing number of compute devices that people have with them and along with that comes the need for services that tie people’s data and devices together, regardless of platform. This too, I believe, will lead to large shifts in the balance of power and influence across the tech industry.

      • Space Gorilla

        Ah, but the iPhone is and always was a mobile computer and iOS is already a robust (and growing) computing platform.

  • jfutral

    Not that I am paying all that much attention, but the only evidence of companion apps I’ve seen is for TV and usually only supplied by the local affiliate with some minor forays for program specific work. I am not convinced (but could be) that it will be all that big a deal. It all sounds convenient, even, informative, but I think, particularly with TV, it adds complexity to a generally accepted and expected simple process. Beyond hash tags and Twitter, I don’t think people are all that interested. Maybe different in more vertical markets, especially with the new chips where Cook thinks it is about to explode. But what do I know?

    I’ve _wanted_, not necessarily companion apps per se, but, apps on my iPad that extended or even added functionality from my desktop productivity apps. But that does not seem to be a high priority for developers. Not sure why.

    Joe

    • Bob O’Donnell

      Joe, my notion of companion apps is actually directly in line with what you describe in your last paragraph and I too am a bit surprised we haven’t seen more of them. However, I also think that’s a reflection of the fact that people are just getting used to this idea of getting their devices to work together and so it’s taking a while for them to come up the right kinds of ideas. I am convinced, however, that longer term we will start many of those kind of extended functionality companion applications.

      • jfutral

        CAD (I’ve mentioned before) could do well with this, especially with BOM features or even just allowing minor editing with a tablet for onsite work, but It seems all they can do to focus on the PC app. You would think for a minimum of $2000 a seat, something else could be accomplishable.

        Joe

        • Space Gorilla

          Bechtel is doing some interesting stuff on site with iPads. I think there’s a profile on Apple’s website.

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