The Bull Case For the PC

Late last year, I decided to debate myself to come up with an alternate scenario to my bear case for the PC. Consider it a bull case for the PC desktop or notebook form factor. It is easy to observe the saturation of the PC today in many markets along with the static nature of its growth line and create a scenario where the PC category is not and will not return to signficant growth. However, for the sake of argument, I’ll state the point that PCs can return to a growth category again and find new customers. Basically, if I drew the stick to debate the flip side of the PC is dead narrative, this is how I would do it.

The examination of the upside for the PC category hinges on one central question. Is there a market for first time notebook or desktop owners? I’ll share evidence that not only is the answer yes, but the smartphone is, in fact, the gateway for future first time desktop or notebook owners.

Undoubtedly, hundreds of millions of people are getting their first computer every year. This computer comes in the shape of a smartphone and fits in your pocket. Today, generally speaking, a very small percentage of people each year are getting their first computer that sits on your lap or desk. The reality is the vast majority of the roughly 300m annual PCs sold are being purchased by existing PC owners. But this is the world today, not necessarily the world five years from now.

As we look at the current installed base of PCs compared to smartphones, some interesting observations can be made. The first is approximately 75% of smartphone owners globally also own, or have regular access to, a PC of some kind. Keeping that in mind, we observe that, while PC usage is going down, ownership is not, or at least doesn’t seem to be. For the vast majority of existing smartphone owners, the PC remains a key computing endpoint for certain tasks for which it is the best suited. The PC may be used less, but it is still used.

Another key data point for this argument is PC penetration in developed parts of emerging markets. We refer to these as tiers. Where tier 1 and 2 is the most developed part of a developing region, like Beijing or Shenzen in China, or Mubai and Delhi in India, and tier 4, 5, or 6 are the more underdeveloped parts of a region. Among the higher tiers of emerging markets, PC penetration is quite high and often in the 60%-70% range depending on the city. This has everything to do with the economic status of these consumers and also the nature of the capabilities of PCs being implemented in a growing number of jobs in the region. To a degree, we can draw many parallels to these more developed tiers of China, India, Brazil, etc., to the developed West when it comes to the PC usage and penetration.

Now, turning our eyes to non-PC owning, first time smartphone customers. Over the next five to six years, billions of people will fit this description. If there are new or first time customers of a desktop or notebook it will have to come from this customer base. Therefore, it is my premise that the smartphone will serve as training wheels for first time computer owners, helping a percentage of these new customers eventually migrate up to a PC as a part of their personal computing solution.

When we look at the evolution of computing, we can observe how it has always been a journey of helping people do more. Moore’s law has ensured the capabilities of a computer does not stand still and will continue to increase. If we believe the PC is the single most capable computing form factor on the market then, as consumers get their first pocket computers, start to learn and embrace computing, understand its personal, educational, and economic upside, it is reasonable that many will graduate up to a full personal computer when they are ready to do more. The PC may over-serve many of the most common computing tasks for mass market consumers today, but we all recognize there are still use cases where the smartphone under-serves many use cases as well, as evidenced by ownership not declining. As first time smartphone customers mature, there will be a desire for the increased capabilities a PC offers.

Here is a scenario that could happen. A farmer in Africa gets his first smartphone. Realizes the power and potential of the internet. Starts using his smartphone to sell his sheep, understand fluctuating pricing in his region, and search for ways to increase demand for sheep. He uses the internet to learn how to better sell and raise healthy sheep. He collaborates with other farmers in the area on sheep trends. He grows in economic status, starts to want to learn more, do more, manage his business. His needs have increased. Is the smartphone the only computer he will ever need?

In many markets, young, ambitious, and increasingly tech savvy consumers are getting their first PCs in the shape of a smartphone. As young people in those markets become more tech savvy and look to start entering the work force, or go to school, will their smartphone be their only tool? Will the smartphone suffice as the only educational tool for a developing region? Will future businesses or work forces in developing markets all run solely off smartphones?

As the internet comes to the masses in developing countries via a pocket computer, it will be a catalyst for developing regions and fundamentally help them mature. When they are developed, are we to make the assumption that all they will ever use is a smartphone? In fact, in many emerging markets we see desktop and notebook penetration high in parts of the market which are more developed both with infrastructure, education levels, and higher disposable income. So the evidence suggests that, as developed markets ripen and infrastructure and economic status increases, the PC could become desired tool.

The smartphone will be a critical part of advancing personal computing as the training wheels for the developing markets and teaching them the basics of technology literacy. Which means, gradually, we will see a market evolve and actually grow again, something that has not existed for quite some time via this market for first time PC buyers. We can’t ignore that the smartphone will be the computer used most often. But we can challenge the assumption it is the only computer they will ever need. Instead of mobile only, we should realize the future is more likely to be mobile mostly.

Other potential catalysts:

  1. PC user interfaces evolve to eliminate complexity thus eliminating the computer literacy barrier. *May not even be Windows
  2. Smartphone adoption increases the ubiquity of power outlets as emerging markets develop.
  3. Tablets act as catalysts as well as training wheels for more capable computing form factors like notebooks and desktops. In some cases, the tablet may also evolve to be the more capable device as a first time computer for this group.
  4. Business models for PCs shift, taking advantage of similar hardware as a service model thus dramatically lowering the entry level price of a PC.

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

40 thoughts on “The Bull Case For the PC”

  1. PC pipe dreams ;-)… Install base isn’t even close on the consumer side. Take out the enterprise side of PCs and we are not at 75% overlap.

    Also the key metrics should not be unit sales. Unit sales have held up just about but all other metrics are in decline.
    ASP is still going down precipitously. Apparently it’s below $400 in Q4. Users are clearly valuing their PC time less and the value of the PC market is tanking.
    While some use cases are still PC bound, that is ever reducing as mobile devices get bigger and better and the software improves. The sheep farmer does not need a PC under any circumstances. Research, simple spreadsheets etc. can all be done in mobile. The key thing is that PC owners are spending less and less time with their PCs as use cases go away.
    Status symbols of wealth in developing countries… I don’t think so. The emerging middle class in developing nations may pick up more PCs, but I guess this will do little more than offset the slower replacement rates in the traditional markets. My company (>100K staff) is no longer replacing PCs on the 3 year cycle. My thinkpad is 4+ years old (2nd gen i5) and perfectly good enough (with a new battery and SSD). It won’t get replaced until it breaks. My Macs are 2011/12 models and there is no pressing need to change them either. I7 quad cores in a desktop don’t require haswell or broadwell chips and MBAs keep on ticking.

    The PC age is over like the Stone Age is over. We still use stone, it just doesn’t drive decisions or dominant value any more.

    1. By your logic, I bet you disapprove of medical devices too. PC’s were oversold, that’s all. Now they will simply be in the hands of those that know what to do with them. Yes, they might cost more.

      1. All I was doing was calling BS on the Bull case, not on PC use in general. You have elegantly supported my case. Thank you.

    2. 1) These developing countries will have growing enterprise sides too.
      2) Productivity and purchasing behavior is going to be different in a developing country than a developed country. Entrepreneurship levels are actually much higher for developing countries (small business owners, etc). PCs ultimately don’t really follow “Enterprise” so much as “productivity”.

  2. Interesting take. From a slightly different perspective, you could as well be making a bull case for tablets. What makes you think these scenarios will drive PCs rather than tablets? Moving to a tablet seems like a more natural migration than a PC.


    1. Yep, I’ve made that case many times before that tablets become the first more capable PC than a smartphone. I’m starting to see this happen already in emerging markets were families in these rural regions are articulating they are getting a tablet as their first PC.

      1. It’s going to be interesting to watch the boundary between tablets and PCs over time. Moore’s law seems to favor tablets more than PCs. Laptop and desktop speeds for first time buyers haven’t increased much over the last few years, and in some cases speeds are decreasing.

        1. “Moore’s law seems to favor tablets more than PCs.”

          That’s true for casual users. Not so for more “advanced” users.

  3. Ben, for most of the use cases you describe here(including gaming), connecting a phone/tablet to a screen and keyboard would probably suffice(i.e. “good enough”) – the web-based and the android ecosystems are pretty wide(or mouse based android-which google works on). Or if not, some chromebook/chromebox will do fine.

    This coincides with the fact that for most people – pc’s are already overshooting their needs for some years. But still the pc has superior keyboard and screen size.

    One wildcard though with the developing world would be Virtual reality,It would have great appeal to many, and will determine their platform choice, and the pc has a decent chance to win as the platform for virtual reality.

    1. VR, and even AR, isn’t going to be quite the mainstay that PCs or Smartphones are by virtue of their form factor and natural use cases. They’re specialist devices, not ubiquitous ones.

  4. I’m not convinced. Developing economies differ from mature economies in a number of important respects: 1) labor is very cheap compared to capital, a sensible African farmer will quickly conclude that he has far more time than money and conclude that most time saving devices are a waste of the little money has, 2) reliable electrical grids are in short supply and will limit PCs, 3) developing nations are generally not held back by technology.

    1. To follow my logic, you have to imagine the future of developing regions changed by technology, led by smartphones, and not the world today. Which is not changed by technology. I’ve given no timeline on when I think this could be a shadow of a reality but it is a ways off.

      1. Way way off. So far off that most of today’s struggling OEMs would be foolish to bank on this second wave saving them. The growth opportunity will also come much slower.

  5. That most current pc owners are using their pc’s less suggests that the future for the less affluent will involve more pc’s in libraries, in corner shops rentable by the hour, and the like. Will there be increasing access to PCs in tier 3/4 areas, such that a billion or so additional people become at least occasional PC users? Probably yes. Will there be increasing ownership of PCs? Probably not all that much.

  6. The phone and tablets are performing the functions that most consumers would have done on a desktop or laptop – which is primarily consumption of content and communication. Desktops and laptops will be devices of choice for content creation. There will be many off-lease and used desktops and laptops that will be much easier for original owner to replace rather than update win version. I do believe that these will find extended life in budget applications with some version of linux installed.

  7. Although I understand the importance of viewing the PC market from multiple angles, I question the relevance of coming up with a scenario that will take at least 3-5 years to happen (which I think is the minimal time it would take for the training-wheels effect to occur), given the very high pace of change in this industry.

    Instead, for the mid-term, I wonder if it is not more important to ask the philosophical question; “What is a PC?”. What makes a PC unique compared to a tablet or smartphone, and where are we less likely to see convergence.

    For example, I would not consider screen size, keyboards, and multi-tasking UI to be fundamental differences between a tablet and a PC (laptop). This is because tablets can easily become larger, at which point a multi-tasking/multi-windowed UI will make more sense. Likewise, adding a keyboard to a tablet is simply a matter of attaching one and tweaking the software to better support it. I would even argue that developing countries are much less likely to favour keyboards because their citizens have not used keyboards at school, unlike many Western countries. I even think that the touch UI does not preclude a complex UI with complex controls, because you can use animations to smoothly show and hide them. Additionally, if tablets get larger, then a developer will be able to use more space for the controls.

    I would instead define a PC as a computer device that does not have sandboxing etc., and instead gives the user and the developer the freedom to do basically anything that they want to do. This freedom is most likely the only reason why a PC may maintain an edge over tablets in the mid-term.

    Therefore, whether or not PCs can expand beyond their current user base, or can maintain their current base, depends largely on how Apple etc., manage to expand the sandboxing model to allow complex tasks that previously required the freedom of a PC. The usefulness of the Extension API etc., how they evolve, and how well they are adopted by the developer community, is, in my opinion, all that really counts.

    1. This is 1/2 of a thought experiment. If you analyse the computing device as “jobs-to-be-done”, then there are many area’s of overlap between the SmartWatch, SmartPhone, Tablet, Laptop, Desktop and Cloud. This leads logically to an analysis of “overlap/convergence”. Which analysis suggests that the usp’s for the laptop/desktop will reduce over time, if we view the small compute form factor (Smartwatch/Smartphone) and the large compute factor (Cloud) as being involved in a sort of pincer movement.

      1. I’m not sure what “jobs-to-be-done” you are referring to since you do not describe them in any way. Hence it’s impossible to understand what you mean by “usp’s for the laptop/desktop”.

        Having said that, your last sentence seems to indicate that you are considering computing power to be a part of the current USP of laptops/desktops. If so, I completely disagree. Even my 2 year-old iPhone 5 can handle video editing rather well. It’s actually a better experience then my 2011 iMac.

        1. Hi Naofumi. Apologies, I assumed that you would be aware of the JTBD part of Clay Christiensens disruption theory. It basically states that, for example, a car is not a car, but a means of travelling from A to B and direct competitors are not just cars but bicycles and trains/trams etc. In the same way a computer is just a device which can perform functions like email, Skype etc and there are other devices which can also perform these functions.

          Thus on a JTBD basis I completely agree with your 2nd para. Over time the functionality of smartphones will get better, and for most people, the performance differential between the smartphone and the laptop/PC will get smaller.

          1. You were talking about the USPs of a laptop/desktop, presumably in comparison with smartphones/tablets. However, it is very unclear what you are considering these to be. That is what I mean by asking “what is a PC?”

            Unless you clarify what you think the USPs are, I don’t think you’re actually saying anything. You can use the JTBD concept or anything else you wish.

  8. PCs are never going to disappear. They have their capabilities and no mobile device can match that. It is actually good for the PC industry. There will be less number of players. The price will go up once the race to the bottom tosses most OEMs. Then PCs will become more specialized where processor speed, software robustness for design, graphics, data analysis, editing, modeling, software development for all devices etc will improve tremendously. PC use will become confined to specialists and those involved in routine data based work. Tablets will carry the condensed information for demonstrations for the specialists and function as entertainment devices for the others.

  9. If Microsoft does not mess up again and again, the PC industry will do well. Part of the problem with the PC industry is its sole reliance on Microsoft. People have moved away from the PCs and younger generation likes the Apple laptops more is because of the damage Microsoft has done to the PC industry and to itself.

  10. Your argument sounds a lot like “mobile first,” which Microsoft has unfortunately claimed use of.

    We have a relative who actually WAS taken out of school (~age 7?) to watch goats, but subsequently taught herself to read & write… on a PC. So I don’t dismiss the goat-tending scenario that struck others as too slow and/or far-fetched. But a couple years hence, it’s hard to see it happening on a desktop; seems much more likely on what’s today a $99 tablet.

    Wintel has been a huge boon to Western businesses and individuals, but it’s awfully hard to conjure economics that will favor X86, traditional windowing OSes, legacy apps, etc, in markets where everybody will be bridging from an Android phone. Maybe if “PCs” somehow synch from non-Google Android phones and run the same apps, there’s a good upgrade path. Otherwise, I’d just expect the phone market to swell into phablets & tablets.

  11. I couldn’t agree more. I’ve lived and worked in 20+ developing countries, and a laptop is an aspirational tool. People use them for MS Office at work, and for games, music, and YouTube at home, often taking the place of a TV. But in a country like Rwanda, where I’m living this year, where the average annual wage is $900 and import duties on laptops are about 70%, a $75 smartphone is a more realistic first computer for younger people. But every day I see people glued to ancient Dells and HPs, literally held together with packing tape, running XP and Chrome or Firefox. As your tiered analysis of emerging markets correctly points out, it’s not about preference, it’s about cost. If most of my young friends could pick, they’d be carrying a $10 Nokia for voice and SMS, and a laptop for everything else.

  12. There may be a bull case for PC like things but not the current embodiment of PCs. Current PCs require far more computer centric management than smartphones do.

    In the old PC world, few choices of internal components and lack of upgradability is considered heresy. But in the new world people just want machines to work, work for a long time without any personal management, then will buy a new one when its time. The time cost of fiddling with poorly integrated hardware and software completely dwarfs the costs of just buying a new machine once every five years.

    The hardware/software division of Microsoft and OEMs does not produce the kind of PCs that smartphone graduates will want.

    Apple seems to understand this as they migrate Mac OS toward iOS in terms of reliability, sandboxed software and lack of upgradability, while maintaining and improving the distinct large screen, multiple screen, touch pad (and mouse) interface that gives the PC form factor its real value.

    Disruption theory be-damned, who wants to spend their time saving penny’s building their computer or fixing their registry anymore? Only really serious gamers and computing professionals.

  13. I think there are several issues with PCs versus tablets/phones:
    1- PCs require a lot more infrastructure: reliable power, space to put a desk & monitor, ability to secure that space…
    2- PCs are a lot more expensive. That’s surprising because an Atom PC is mostly a $100 Windows tablet w/o screen nor battery, but even those cut-down PCs go for a bit more than their tabletty incarnation, and that’s before monitor+keyboard+mouse+space+desk+chair. Android desktops do start at $40 naked, but they’re barely PCs, and the main box cost isn’t the main issue.
    3- PCs ecosystems (MacOS, Linux, and Desktop Windows) have mostly failed to modernize: complex UIs, no walled garden (hence malware), no unified Apps/OS updating (except Linux).

    Windows is taking the most steps to fix the discrepancy, but I think MS are hamstrung by their need to protect their entreprise Windows license revenue: there’s an issue with the new $150ish Atom desktops not being entitled to a free Bingdows license.

    Android is letting that opportunity fly by, except in the console space. Apple probably isn’t that interested in a low-end market that would require them to eat their “touch and desktop are incompatible” PR.

    In the end, the best example of a modern desktop OS is Chrome OS…

    1. Cook’s “refrigerator-toaster” disparagement hardly defined the terms of the market—it hasn’t factored in marketing materials at all (as indeed, Apple’s ads haven’t mentioned competition for a decade).

      And given the resounding lack of success for Windows 8.x and Surface overall, you can’t argue that the market has been dying for a single-metaphor product.

      I take it that the iPad plateau and Surface failure are manifestations of the fact that most businesses have few positions that need both more mobility than a laptop provides and more info than a phone can show. Businesses will create these functions but we all know they are conservative; it will take some time.

      With a bit more experience in mobile UIs, developers will be able to create coherent interfaces that blend multiple metaphors. (“Desktop” is already stretched beyond recognition.) but again, as the howls of Windows users and cancellation of RT shows, that day isn’t here yet.

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