There is an under-appreciated dynamic of the global consumer technology market which has just recently occurred. For many of us in the industry, when we look at the PC market we think, since PCs have been at relatively affordable prices for nearly two decades, then everyone in the developed markets has owned a PC personally and use it extensively. When, in reality, the pure consumer PC market is not that old. From our research, we learned 33% of consumers in the US purchased their first PC between 2009-2015. 37% of US consumers are only on their first or second personally owned PC. As someone who has been working professionally in the technology industry since 1997, I have owned more PCs than I can count. Seeing such a large percentage of the market still with relatively new PC ownership shines a spotlight on just how different the corporate and consumer PC industry is.
I make the point about a decent sized chunk of the US consumer market getting their first PCs in the 2009-2015 timeframe to showcase a unique scenario which took place. 2008 was the first year annual worldwide shipments of consumer PCs overtook corporate PC sales volumes. The PC market was over-indexed on consumer PC sales volumes until about 2013 when the two became relatively even. But, if you recall, it was around this same time consumers were just getting their first PCs that the smartphone hit the scene. Very quickly on the heels of smartphones came tablets. Looking back, within the span of four years, PCs, smartphones, and tablets went mass market at the same time.
I believe the rapid adoption of smartphones, in parallel to the consumer growth curve of PCs, is one of the primary reasons consumers never had the chance to establish as deep a relationship with their PC as those of us who have had them for decades. The implications of a good portion of the consumer market getting their first or even second PC around the same time they were getting their first smartphones, is a primary reason the PC growth cycle was cut short and never reached its full potential. There was a time myself and many others believed every person would own a PC. While that belief is coming true, it is coming as a PC in the shape of a smartphone, not in the shape of a notebook or desktop as we once thought.
Due to the timing, the consumer PC segment never really had a chance. This dynamic is likely, at least in part, one of the reasons 70% of consumers in our panel said their smartphone is their most important personal (not work) device. Or that 43% stated they use their PC or Mac mainly for work tasks and their smartphone for most other tasks. Or that 45% said they spend more time at home (not work) using their smartphone than their PC and Mac. And perhaps the most significant sentiment statistic we collected was 64% of consumers say they find themselves spending more time using their smartphone the longer they have owned it.
Typically, technology rolls out in waves. To use a surfing analogy, waves generally come in sets of three with periodic breaks in between. Usually, companies can ride these tech waves with enough time in between to surf a few. But in this case, we didn’t have three waves — we had one gigantic wave and those who missed it got caught up in the crashing surf break.
Obviously, a huge part of this wave came from smartphones. While consumer PC shipments ranged between 150m and 200m during this time frame and total industry PC shipments were in the 300m range, smartphone shipments quickly rose to one billion and beyond annually during the same time frame. There has been no other product in consumer tech with the scale the size of the smartphone market. That will not change anytime soon. So those companies who rode the mobile part of this tsunami were the real winners — Apple and Google (and Google partners like Samsung, Huawei, etc.). But both of these companies also rode the tablet part of this wave as the combined two segments dwarfed the consumer PC portion of the tsunami.
The consumer tech tsunami has assisted in changing the fortunes of many companies and bringing numerous new players to the landscape. However, the important observation of any wave, whether it comes all at once as is the case here, or in smaller surges, is the calm waters which follow. That is the period we are in at the moment as everyone selling hardware to the consumer is seeing dramatically slowing sales volumes in nearly every market. PC growth will be negative to the degree of 8-10% in 2016. Tablet market growth will be negative 10-15% in 2016 and smartphone growth will be between 3-6% globally in 2016. This initial wave brought new technology en masse to consumers globally but now that cycle is over and consumers tend to be content with what they have and buy less frequently.
In the developed world, all the products I spoke of are now in replacement cycle market dynamics, not growth dynamics. Because of this, we see buying patterns change, replacement cycles lengthen and overall growth of these categories halts to a decline or a slow crawl. Those who rode the consumer tech tsunami now have to manage the calm waters, which can often bring more turmoil and carnage than the wave itself. Most importantly, being prepared to not miss the next big wave becomes central.
Whether the next wave is virtual/augmented reality, wearable tech, artificial intelligence, or something else, I’m not sure we will see anything like this consumer tech tsunami for a very long time.
One thing I would recommend is to stop thinking of PCs and Smartphones as “computing devices” and instead treat them as “communication devices”. If you think of them as “computing devices”, then you can only use a 40 year window to learn from historical trends.
However, if you treat them as communication devices, then you can go back to the invention of the postal system, radios, landline phones, telex, fax, pagers, cellphones etc. It gives you a much longer history from which you can observe recurring trends. There are many more waves you can learn from.
Furthermore, this distinction will affect your prediction of the next wave. If you think of smartphones as computational devices, then maybe you will think AI is the next wave. If you think of it as a communication device, then maybe it’s wearables (as notification devices).
I try to look at tech from the communication angle, and it seems to me that there is still lots to be done. However, with Apple already taking 40% of Silicon Valley profits, it’s getting very clear that riding tech waves will no longer sustain Apple’s growth. I think we should be looking for waves outside tech, in healthcare, housing, transportation (or anti-transportation), etc.