Maturing Tech Markets means Increasing Cross-Category Competition

Being a device vendor in 2016 is hard. Former high-growth markets (smartphones) are slowing or declining (slate tablets). The traditional PC market continues to struggle to find its new normal. And nascent categories such as wearables, virtual reality, and augmented reality are more future promise than shipment drivers today.

For all but a few, the march toward commodity status is relentless. The result: Competition among hardware vendors to find new segments and areas of growth is becoming ever-more fierce.

Such competition was on display at the Mobile World Congress this week, where we saw several vendors known for products in one category launch new products into adjacent categories. Now, it’s important to note that increasingly the lines that distinguish one device category from another—a smartphone from a tablet, a tablet from a PC, a PC from a smartphone—will continue to blur. At IDC, we track device shipments and we need clear product categories to enable accurate counting. So this makes our job harder. But consumers and business buyers don’t care about such labels. They just want the right device for the job. As a result, the fact more vendors are playing in more categories should lead to better products for end users, which is, of course, a good thing.

Huawei Launches a Windows 10 Device

While the broader tablet market has experienced steep declines (down nearly 10% worldwide, YoY in 2015), the detachable segment—those devices with first-party detachable keyboards—has been growing at a fast clip (albeit, from a small base). In 2015, worldwide detachable shipments increased to 16.6M units, up from 7.9M in 2014. IDC expects that strong growth to continue in 2016. Now, back in 2010—2012 when Apple’s iPad and later Android tablets started gaining steam in the market, there was much discussion in the industry about tablet shipments cannibalizing PC shipments. What our research showed however, was that very few people bought a traditional tablet back then with the specific intention of using it to replace a PC. There was plenty of usage cannibalization with people using their tablets to do more things, which ultimately resulted in them using their PCs less. Less usage led to extended PC lifetimes. But few people swapped a tablet for a PC outright.

This time, however, it’s going to be different. Today’s detachables are increasingly capable. When Microsoft launched the first Surface products, the company proudly proclaimed them to be no-compromise tablets and PCs when, in fact, they compromised on both counts, leading to devices that weren’t particularly good tablets or PCs.

Today’s Surface Pro 4—and competing products from all the major PC vendors—are very different machines fully capable of replacing most traditional PC user’s notebook. As a result, consumers and companies will increasingly purchase detachable products to replace traditional PCs. Real cannibalization is happening and, as detachable growth accelerates, those unit volumes will increasingly come out of traditional notebooks.

Looking to capitalize on this opportunity at MWC, Chinese smartphone giant Huawei launched its first Windows 10 product, a detachable tablet called the MateBook. By all counts, it’s a solid first offering that leverages the company’s mobile design prowess. It features a 12-inch screen, is just 6.9-mm thick, and includes a battery the company claims will run for up to 13 hours. Also, Huawei embedded the same fingerprint sensor from its Mate 8 smartphone into the device’s volume rocker, which should make locking and unlock the device easy and fast. It runs Core M processors with an optional stylus. The company didn’t announce final pricing on the device but it will likely range from $599 to $1699.

Naysayers might suggest that traditional PC vendors, and Microsoft itself, have little to fear from Huawei entering this market. But the company is a serious smartphone powerhouse, with strength both in China and at the worldwide level. Its design capabilities, scale, and channel partnerships make it a legitimate contender out of the gate. I fully expect other major Chinese smartphone players to enter the Windows 10 market later this year, but the industry will carefully watch Huawei’s success or failure here.

HP Launches a Smartphone

While many expected to see a Windows 10 device from Huawei at this years’ show, it’s safe to say few expected PC giant HP to launch a Windows 10 Mobile-based smartphone. Fewer still would have expected it to be so notably good. As noted in a Bob O’Donnell’s column earlier this week, the X3 is a robust, 6-inch, Qualcomm Snapdragon 820-based device. But what makes it interesting is HP has launched a product it clearly hopes will eventually cannibalize some portion of the PC market where it is currently the second-largest player (behind Lenovo). The product’s optional desktop dock turns it into a full-fledged desktop and its Mobile Extender dock turns it into a notebook (albeit one with a phone dangling from it). As a result, HP envisions enterprise using the device to replace, not just a person’s existing smartphone, but their notebook and desktop, too. It’s an audacious move and one that’s going to be very tricky to pull off, but you have to give them credit for trying.

Part of the risk here for HP is they only control part of the X3’s destiny, as the company is entirely dependent upon Microsoft fulfilling some key Windows 10 Mobile platform promises. Specifically, the Universal Windows Platform (UWP) has to gain traction and attract enterprise app developers. And MS must deliver the promised experience within Continuum, the feature within Windows 10 Mobile that transforms the interface of the device depending upon whether the user is on a 6-inch phone screen, a 12-inch notebook screen, or a 22-inch desktop. That’s a lot of things that have to go right — only a few of which HP controls. The product is still months away from shipping, and HP hasn’t announced final pricing and channels.

Complicating matters further is the presumed existence of a future Microsoft Surface smartphone. If such a product exists, it may well do all the things HP has set out to do with the X3 with the added benefit of being more tightly integrated with the OS, since Microsoft would be making both the software and the hardware.

Yep, competition is hard.

Published by

Tom Mainelli

Tom Mainelli has covered the technology industry since 1995. He manages IDC's Devices and Displays group, which covers a broad range of hardware categories including PCs, tablets, smartphones, thin clients, displays, and wearables. He works closely with tech companies, industry contacts, and other analysts to provide in-depth insight and analysis on the always-evolving market of endpoint devices and their related services. In addition to overseeing the collection of historical shipment data and the forecasting of shipment trends in cooperation with IDC's Tracker organization, he also heads up numerous primary research initiatives at IDC. Chief among them is the fielding and analysis of IDC's influential, multi-country Consumer and Commercial PC, Tablet, and Smartphone Buyer Surveys. Mainelli is also driving new research at IDC around the technologies of augmented and virtual reality.

3 thoughts on “Maturing Tech Markets means Increasing Cross-Category Competition”

  1. It would be funny if smartphones companies managed to move into PCs the way HP and Dell haven’t managed to move into smartphones despite early tries and successes (Axim, iPaq). What’s interesting is that , besies Apple, Lenovo Asus and Acer did manage to get a foothold in smartphones despite a later start than Dell and HP (HPell ? Dehp ?).

    There must be some morals in there about not kowtowing to MS too much, and being able to manufacure one’s own devices being helpful when it’s time to innovate; and serving both the Corp and the Consumer masters being hard.

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