Intel’s PC Dilemma

PC installed base is 1.8 billion and 600M+ are 4+ years old according to @intel….that’s part of the reason why they’re positive on growth. ~ Bob O’Donnell (@bobodtech) 11/20/14

Here is the chart Intel provided in support of the above:

IntelChart

Intel is suggesting 600 million PCs over 4 years of age is reason to be optimistic because these PCs are going to someday soon have to be replaced. The key question is: When these PCs are replaced, what will they be replaced with? Intel is suggesting these 600 million four year old PCs are going to be replaced by desktops, notebooks, 2-in1’s and Intel tablets. I think the facts and common sense tell you it is much more likely the vast majority of these 600 million four year and older PCs are going to be replaced by phones, ARM tablets or nothing at all.

What We Know

We know mobile devices are eclipsing PCs. Intel believes that there are 1.8 billion PCs in existence. On the other hand, there will be some 1.3 billion mobile phones sold in 2014 alone.

mobile-is-eating-the-world-7-1024

We know the PC segment is not growing ((Intel pointing out the PC industry has stabilized. This is true but it is also not growing. ~ Ben Bajarin (@BenBajarin) 11/20/14)) and may, in fact, be in decline. Even Intel is predicting flat unit shipments for PC CPUs in 2015. ((Intel predicting flat unit shipments for PC CPUs in 2015 with a modest decline in enterprise and modest bump in consumer…makes sense to me. ~ Bob O’Donnell (@bobodtech) 11/20/14))

We know the current PC replacement cycle is around five to six years and there is no evidence to suggest it is going to get any shorter.

We can reasonably suppose those who have PCs that are four and more years old are not sophisticated power users who need cutting edge technology to serve their computing needs. On the contrary, they are almost certainly marginal computer users, such as senior citizens or single purpose computer users such as businesses that use their PCs as cash registers and the like. It seems extremely unlikely these low end PC users will want to purchase high end PCs or 2-in-1’s and much more likely they will be able to satisfy their computing needs with phones and ARM tablets.

A Closer Look

Let’s take a closer look at Intel tablets, 2-in-1’s and other tablets.

Intel Tablets

Intel’s efforts in tablets have proven to be a disaster. Intel has spent 7 billion dollars subsidizing x86 Atom Android tablets, yet those tablets have no appreciable market share.

Two-In-Ones

The release of 2-in-1 tablet/laptop hybrid devices, which run on Microsoft’s Windows 8 platform, have not helped Intel sales. Those devices are thought to account for just 4 percent of the market, leaving manufacturers to try other strategies for growth.

The numbers look even worse when you take into account the factย Microsoft has lost 1.7 billion dollars trying to make the Surface a hit.

Intel says 2-in-1 buyers are buying new PCs a year earlier than those purchasing a clamshell–clearly appealing to a more sophisticated user. ~ Bob O’Donnell (@bobodtech) 11/20/14

That is good news for Microsoft in its efforts to make 2-in-1’s a viable category but it is bad news for Intel. It seems extremely unlikely that any of those 600 million PCs that are four and more years old will ever be converted to high end 2-in-1’s.

Tablets

Tablet sales are probably affected much more by the PC replacement cycle than by the tablet replacement cycle ~ Benedict Evans (@BenedictEvans) 11/11/14

This is an intriguing thought. Tablet sales grew like gangbusters in their first three years of existence and then suddenly flattened. It’s almost certainly true that larger phones have eaten into tablet sales but it’s just as certain that tablet sales have eaten into notebook sales too.

isolated laptop

Conclusion

As older PCs come to end of life, are they more likely to be replaced by PCs or by alternative devices? The simple answer is that it depends upon the job that they are being asked to do. I doubt if the answer to that question is going to lead to the re-aquisition of PCs in any numbers close to the one’s that Intel of is hoping for.

Published by

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why donโ€™t (or canโ€™t) other companies adopt the successful attributes of their competitors?

21 thoughts on “Intel’s PC Dilemma”

  1. very interesting points. it does seem the pc’s days are numbered and intel is trying desperately to bridge to the new world by punting amd out of all their remaining market share and subsidizing their current tablet value chain with below cost parts. Should be interesting and good luck to them…

  2. You make a number of assumptions in the “What We Know” section above. We do not “… know the current PC replacement cycle is around five to six years”. It may be shorter or it may be longer, but you provide nothing that suggest you actually know the answer.

    Similarly, your assertion that people using older PCs are “certainly marginal computer users” who are “much more likely…to satisfy their computing needs with phones and ARM tablets” is baseless. In fact, I know of a numerous large and small companies which still use older computers for important tasks.

    You correctly state, “Intel is suggesting these 600 million four year old PCs are going to be replaced by desktops, notebooks, 2-in1โ€™s and Intel tablets”. Yet in response, you only address the week sales of 2-in-1’s and tablets.

    For a while now you have been promoting the thesis that tablets and smartphones are replacing traditional PCs (desktops and laptops). Though I could provide some real world examples of this (which as far as I know you have not even bothered to do), they are at best anecdotal and not yet indicative of a strong trend. At best smartphones and tablets are limiting the growth of the traditional PC market and are likely delaying some replacement. But until you present evidence that the installed base of PCs is declining, your thesis remains unproven.

    1. “I know of a numerous large and small companies which still use older computers for important tasks” – DarwinPhish

      Which is one of the reasons why PCs are not being upgraded. There is no pressing need.

  3. ” it is much more likely the vast majority of these 600 million four year and older PCs are going to be replaced by phones, ARM tablets or nothing at all.”

    I pray that my competitors adopt that outlook. ๐Ÿ™‚

  4. John

    I’m having some issues with paid subscription here. I’ve tried few times but it is not getting through. I live in UK and I’m using my Visa Debit card but after clicking submitting website says complete all fields which I’m doing. I sent an email regarding this to website management but to no avail.

    Could you please look into this matter.

    Thanks.

    P.S. Or if you can issue me some sort of Honorary Membership for your articles that’d be great. ๐Ÿ˜‰

      1. Klahanas I need your help in one of the matter related to Android.
        Is there any service like iCloud in Android world? Actually I have first generation Moto G Dual SIM phone. Now I’m thinking to replace it with the newer 2014 model. I need some thing like iCloud that backs up my complete phone(settings apps messages contacts App data etc) so that I can restore that back up onto my new android device and my new device would be in same state where I left my old one.
        Currently I’m using G Cloud but I’m not sure it works exactly like iCloud.
        Thanks in advance.

        1. If you have Google Mail, all contacts are restored automatically. Just make sure that they are all in Gmail first, and not on your SIM or phone. You can link them if you have SIM or phone contacts. IM’s get stored in Gmail, they can be restores from there. As far as Apps go, you can backup your data to the Google servers. When you get your new device it will ask you if you want to set up as a new device, or set up based on one of your other one’s. You can even specify which one.

          I hope it works out for you.

          1. “As far as Apps go, you can backup your data to the Google servers. When you get your new device it will ask you if you want to set up as a new device, or set up based on one of your other one’s.”

            Thanks. I don’t know how to backup apps and their data on google servers. I was looking for something like iCloud, which is by the way very nice and convenient feature, so that if I replace my android phone everything would be same like I left on old phone.

          2. I just described to you how to do it. Just as nice and just as convenient, but a choice, not an imposition. It’s found in settings, as many other iOS settings can be found also.

  5. I agree that those old PCs are not going to be a happy hunting ground for replacement sales once people have moved to a tablet/phone as their primary computing device.

    I bought an iPad Air 2 last month, which actually scores higher on Geekbench than my 2009 Intel PC (quad core Q6600 @ 2.4 Ghz). In addition, Windows became quite sluggish over time, infrequent use means that there is now always a backlog of security updates to be installed and the virus scanner reacts in shock-horror that the PC has not run in weeks (i.e. further delays). In short, the infrequent PC user gets a very lousy experience and has no performance advantage over a new tablet. Upgrading to a new PC would not do much to improve this situation, using my office laptop for the few remaining PC chores seems much more sensible and cheaper.

  6. I guess the real question is what the breakdown of use cases is for those 600 million old PCs.

    I agree with you that the ones being used in homes will probably continue to be used until they break (whether from component failure or mere OS corruption, whatever makes it “stop working”) and then while some of them will be replaced, others won’t at all, or will be replaced with something different (tablet, phone, ARM-based chromebook). But for the ones being used in business, it’s another story.

    Small businesses will probably take the same approach as home users — replace only when it “stops working” — but when they do replace, they’re going to get something that lets them use the same software and the same procedures as before, no need for retraining, no need to re-create workflows and templates on a new platform. It’s the path of least resistance and of lowest cost.

    Everything I said about least resistance and lowest cost also applies to large businesses only more so. Of course, large businesses usually have depreciation and replacement cycles in place for most of their office equipment. Plus, for laptops, you’re going to be forced to replace them sooner or later when they break or when the logic board dies (desktops are another story). And if you’re going to replace the machine and the OS, you may as well look into whether or not you need to give that employee a PC at all or if they will be better served by a tablet.

    But the thing is, not all corporations follow “best practices” guidelines for upgrading old operating systems. If the PC in question does not connect to the internet but only communicates with the company’s internal network, there’s really no reason to ever update a PC running a kiosk or terminal app. For instance, I once noticed that our bank (CIBC, not a mom & pop credit union) was using Windows 2000 to run the PCs being used by their tellers. This was after we moved to our current home, so 2008 or later, long after MS EOL’d Win 2k.

    Given how long it’s been since hardware makers stopped writing drivers for windows 2000, I think it’s a safe bet that the PCs running those teller terminals were almost as old as the OS. So, a real-world proof that even some large companies might decide to treat some of their PCs — especially the ones that are used as dumb terminals or kiosks or embedded systems — more like furniture than like office electronics. Instead of a depreciation and replacement cycle, they just keep running the old hardware for as long as possible. And a company with an IT department can keep an old desktop running for an absurdly long time — a motherboard that’s lasted 4 years will most often continue to work for a decade or longer, so it’s just a case of replacing the hard drive and perhaps the power supply. Drop a quality power supply and a pint-sized SSD into an office desktop, and you’ve got something that will effectively last forever.

    1. Correct! Most of those 600 million PCs won’t be replaced until they die and when they are, it will be by very inexpensive ones. No way is this a growth market to expect big things from.

  7. Oddly enough, when clients come calling, they never ask for anything other than pc’s. They aren’t editing spreadsheets on their ipads, and they aren’t using their phones with dual monitors to get work done. We’ve sold nearly 2k pc’s this year, and under 35 tablets. In fact, didn’t i just read that tablet growth has begun to slow?

    Does this guy have any actual data, or is it another example of a weatherman blog? (If you don’t know, keep guessing over and over until you get a hit)

  8. “or single purpose computer users such as businesses that use their PCs as cash registers and the like.”

    I still see many retailers using DOS POS programs in old versions of Windows at their check-out counters. I don’t see much hope for Intel there.

  9. I expect that many, if not most, of the 600M 4+yr old computers are attached to dialup or DSL internet connections, if connected at all. What good would a nice new 2-in-1 do for those PC users?

  10. I think that a great many of the tablets purchased since 2010 a replacements for those 4+yr old PC. Those PCs are probably siting on a shelf somewhere gathering dust. My daughter has 7yr old Dell which was replaced by an iPad in 2010. The only use the Dell gets now is to play DVDs of movies that cannot be found on Netflix, Hulu+ etc. Otherwise it sits on top of a chest in our den with its charger wrapped up on top of it – unplugged of course.

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