The PC Industry’s Consumer Conundrum
The computer industry continues to experience tough times, as evidenced by IDC’s preliminary 1Q16 shipment numbers and Intel’s recent quarterly earnings data. Charles Arthur wrote a good column on the topic last week. I’d like to dive deeper into one of the fundamental issues facing the industry — declining consumer demand for home PCs. The fact is, fewer consumers are replacing their old desktops and notebooks in mature markets and, in emerging markets, they’re simply not buying that first PC at all, choosing tablets and smartphones instead. The result is a shrinking consumer PC installed base which will, in time, lead to a diminished demand for consumer-focused PC apps and services, creating a vicious circle. It seems the power and complexity that keeps the PC relevant for commercial use cases is now working against it with consumers. The industry seems unable to articulate a compelling reason why that should change.
IDC’s top line PC numbers tell the broad story and survey results help shed light on the details. In 2005, worldwide shipments of PCs totaled 208.8M units and consumer purchases made up about 40% of that total. Over time, an increasing number of people bought PCs to use at home for a range of tasks but more specifically to access the internet. By 2011, PC shipments worldwide peaked at 363.8M units and the consumer share grew to 54%. That year was the height of consumer PC shipments.
In 2012, the entire PC industry began to contract and the impact of smartphones and tablets on device spending started to become evident. By 2015, consumers constituted about 49% of a diminished worldwide PC shipment total of 275.8M units. IDC’s worldwide forecast numbers show consumer shipments continuing to decline in terms of shipments as well as the percentage of the total PC market throughout the five-year forecast period. And, while commercial shipment volumes will eventually stabilize, there’s currently no expectation consumer volumes will do the same.
A review of IDC’s massive, multi-country ConsumerScape 360 survey of digital consumers shows several clear and troubling trends when it comes to current consumer PC owners. Chief among them: fewer are using their PC for daily tasks. Over the years, we’ve polled respondents about their use of the PC for a wide range of tasks and tracked what percentage said they did particular tasks on a daily basis. For example in 2012, more than 90% of computer-owning respondents said they checked email daily on their PC. By 2015, that number had decreased to about 65%. During that same period, the percentage that used a PC daily for online search declined from 78% to 61%, reading online news slipped from 66% to 53%, and social networking dropped from 66% to 55%. The survey doesn’t illuminate the why behind these declines, but it seems pretty clear that, for many, the PC is simply overkill for the task at hand, tasks better served by simpler devices such as smartphones and tablets. When we asked the same task use questions of tablet and smartphone users, as you might expect, the percentages using them daily went up over the same period.
Equally troubling in that same large survey, when we asked current computer users in 2015 about their future PC-purchase plans, a sobering 65% said they had no plans to buy a new PC in the future. When we asked respondents who currently owned a tablet, smartphone, or television (but not a PC) about their PC purchase plans, 69% said they had no intention of buying one. (Note: IDC is currently fielding the 2016 version of the survey.)
Many of the top PC and component vendors in the industry like to point to the large installed base of aging PCs and suggest it is just a matter of time before their owners replace them with new ones. While this perspective likely still applies to much of the commercial installed base, it seems increasingly clear it’s not true when it comes to the consumer installed base. In highly penetrated PC markets such as the United States, there was a time when it wasn’t unusual for a home to have multiple PCs. It seems unlikely this will be the norm going forward. The best case scenario is likely to be that over time, as these multiple PCs age out, many households will buy a single new PC to continue to do the decreasing number of tasks to which tablets and smartphones remain ill-suited. An increasing number of these replacement devices will be detachable products such as Microsoft’s Surface Pro, a category IDC currently counts within its tablet numbers.
While the overall PC market is contracting, the weakness in consumer demand is having a dramatic impact on those vendors that traditionally drive significant consumer shipment volumes. As widely noted, Apple has been the exception here. It is is fair to argue that few within the PC industry, save Microsoft itself, is in a position to replicate the tightly coupled hardware, OS, and services offerings that Apple has put together on the Mac. An equally important aspect of the Mac’s success is the growth of the iPhone and the company’s ability to drive a better experience for those consumers who buy both. This is an area other hardware vendors who play in both the PC and smartphone markets clearly need to explore but their dependence on Microsoft and Google for the underlying operating system will make this exceedingly difficult to replicate.
In the end, it is hard to envision a broad consumer PC rebound. Microsoft has served up a good operating system in Windows 10 and hardware vendors are creating compelling products. But a PC is still a PC, with all the good and bad that entails. It seems many consumers have simply moved on.