The PC's Day of Reckoning Is on the Horizon

It may take a few more years, but eventually the PC's day of reckoning will be here. In the not-so-distant future, the tablet market will overcome the PC market in unit volumes. Market researcher IDC is predicting that this will happen come 2015.

Tablet shipments are expected to grow by 59% this year to hit 229.3 million, compared to the 144.5 million units shipped in 2012. That should be enough for tablets to overtake the laptop subset of the broader PC market by year's end.

IDC's Ryan Reith says the transition was sparked by a difficult economic environment, but a new global computing paradigm is taking shape with mobile front and center. Tablets are cheaper than PCs and many consumers have seen discretionary income decline amid a tough global economy. The PC will always have a place in the enterprise with business users, but the large consumer market is quickly shifting to tablets.

Low-cost devices with smaller form factors will drive the shift. Apple (NASDAQ: AAPL  ) remains the dominant vendor with the iPad, but intense competition from Google Android may put pressure on prices. Low-cost Androids are expected to cause worldwide average selling prices to fall nearly 11% to $381 this year.

Over half of the market this year will be devices with displays smaller than 8 inches. IDC similarly attributes Android's success in the low end to this shift, while Apple's response with the iPad Mini will reinforce it. The data also confirms that Steve Jobs was wrong that 9.7-inch is the perfect tablet size.

Screen Size

2013 Forecast

2017 Forecast

Smaller than 8-inch

55%

57%

8-inch to 11-inch

43%

37%

Larger than 11-inch

2%

6%

Source: IDC.

Microsoft (NASDAQ: MSFT  ) has yet to make a meaningful impact on the tablet market. The software giant is very vocal with its belief that the line between PC and tablet will continue to blur, what with OEMs releasing every imaginable convertible form factor. As far as IDC is concerned, devices with detachable keyboards, including Surface, are tablets, while devices with hard-wired keyboards, are PCs.

IDC uses physical specs to differentiate instead of operating system. That means Windows 8 can still potentially benefit from the shift, even if some Windows 8 devices are classified as PCs while others are considered tablets. Touchscreen adoption is on the rise, which bodes well for the platform's prospects.

The trend toward smaller devices should also be a reminder to Microsoft that it desperately needs to launch a smaller Surface.

Apple's market share may continue to decline as broader tablet growth skyrockets, but iPad unit sales in absolute terms will be just fine. iPad pricing pressure should translate into gross margin pressure, but Apple is confident in the long-term opportunities and is willing to take the short-term hit.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In a new premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.


Read/Post Comments (7) | Recommend This Article (0)

Comments from our Foolish Readers

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  • Report this Comment On May 30, 2013, at 3:40 AM, Goregasm wrote:

    Uhh, no? PC's are striving, you're ill informed. Tablets suck, they're really terrible. Unless you're looking to do VERY SIMPLE tasks and play games like 'Angry Birds' forever, it'd be best to stay with a PC..

  • Report this Comment On May 30, 2013, at 7:46 AM, bladecrimson wrote:

    I don't agree with this assessment at all. It only applies to novice users of technology who desire the next gizmo everything to seek some illusory sense of status to show off to their not-freinds...

    As a engineer, I can tell you the Desktop Computer will never fade away, as it is the industrial workhorse of civilization, not laptops, not tablet's, not smart phones, these are all novelty devices with limited functionality. Servers and workstations run our world and make it even possible to use these gizmo's.

    Just because Apple made a gizmo that has no actual buttons, doesn't make it better, more convenient or the source of making all things obsolete. It only shows us that market ting and selling crap is so ridiculously prevalent in out society that people lose their common sense! And Common Sense was already, not that common...

  • Report this Comment On May 30, 2013, at 9:08 AM, Dvoraak wrote:

    I love how people point out the uselessness of tablets without ever considering that consumers FAR outnumber producers. Consumers drive the market and useless tablets cater to them. If producers were the driving force, HP and Dell would be healthier than they are. The PC market is changing. It'll still be here but radically changed. The short sighted people who often comment on these stories will lose nothing. Short sighted companies have already lost plenty..... with more to come.

  • Report this Comment On May 30, 2013, at 10:18 AM, SpokenLegacy wrote:

    If the Surface Pro is considered a tablet then yeah, the future most definitely will be over taken by tablets. A handful of incoming college freshmen want the Pro for its portability and ability to do work as well.

  • Report this Comment On May 30, 2013, at 3:37 PM, RegLeCrisp wrote:

    CFA, eh? MSFT doesn't desperately need to do anything except find a safe place to put all their cash. You'll probably be patting yourself on the back when MSFT comes out with the smaller Surface, even though it's ALREADY BEEN ANNOUNCED. Tablets are an entertainment driven accessory to PC's, which many people already have in their homes. The PC market is saturated and the refresh cycle is longer. By the way, what did you type this "article" on? A PC, I thought so. MSFT is up 25% the past 5 years while paying more than double the yield of the Nasdaq, with a AAA credit rating to boot. "iPad unit sales in absolute terms will be just fine"?. Is that out of the CFA charter-holder handbook? Or the "PC is dead", MSFT is doomed MF cheerleader squad handbook? Microsoft is not trying to make a "meaningful impact" on the tablet market with their hardware, but with their software. Surface is a reference design needed to inspire and possible frighten OEMs into action. Haswell is the catalyst. If Haswell fails to spark W8 tablet sales, they are in trouble. Give it 6 months. I'll take a pass on the "premium" report.

  • Report this Comment On May 30, 2013, at 7:53 PM, TheRealRacc wrote:

    It is more likely that tablets will become PCs, and the tablet will die.

    Then at the end of the day, does it really matter if you call it a tablet or PC? Microprocessor, GPU, storage...inputs and outputs...sounds a lot like a PC to me.

    My money is on the boom of tablets...or PCs...or we can just call it a Cat's Cradle (see Vonnegut, great genius of the 20th Century).

    Long INTC and MSFT.

  • Report this Comment On June 03, 2013, at 11:57 AM, RegLeCrisp wrote:

    Exactly as RealRacc says, the distinction will become largely irrelevant. Then the MF will have to start a new headline, email blast load of crap to pollute my inbox: "The tablet is dead", sell MSFT.....blah blah. MF jumped the shark 5 years ago.

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