Research firm IDC believes that the market for traditional PCs has nearly bottomed, a good sign for PC-dependent tech giants like Microsoft (NASDAQ: MSFT ) and Intel (NASDAQ: INTC ) . Although the firm expects 2014 to be another year of contraction, it is looking for a return to growth in the years ahead, with a floor of about 300 million annual PC shipments for the foreseeable future.
IDC has overestimated the PC in the past, and is likely doing so again. So far, 2013 has been the worst year on record for the traditional PC, but its death is only beginning. In the years ahead, competition from devices running Google's (NASDAQ: GOOGL ) mobile operating system will prove overwhelming.
Underestimating the rise of mobile
In 2010, IDC was projecting PC shipments to slow in 2011, but then rebound to double-digit growth in 2012 and beyond. By 2015, IDC was expecting PC shipments to exceed 500 million, and grow by an annual rate of 10-15% -- projections that seem absolutely absurd today. IDC had thought that tablets like the (then recently unveiled) iPad would take a slight toll on PCs in 2011, but the firm seems to have underestimated their long-term effects, most notably, the rise of cheaper alternatives running Google's mobile operating system.
While the demand for traditional PCs running Microsoft's Windows has dried up, the tablet market continues to grow. Gartner expects tablet shipments to total 184 million this year, up 53.4%, and even IDC admits that tablet sales should surpass PCs by the end of 2015. Most of these tablets will run Google's mobile operating system. Although Apple continues to be the single-largest tablet maker, Android-powered tablets have overtaken the iPad. Apple's tablet operation may remain immensely profitable, but the far cheaper price points, and widely divergent form factors, should give Google the market-share edge.
One of the advantages traditional PCs have always had over mobile devices is raw computing power -- when you need a lot of it, there's no substitute for a PC. But in the years ahead, mobile devices are likely to become far more powerful. Next year, chips will be capable of powering devices running the 64-bit version Google's Android (including Intel's Bay Trail). In contrast to 32-bit Android, 64-bit will allow devices to access more than 4 GB of RAM.
Right now, this limitation is superfluous -- the iPad Air, for example, only has 1 GB of RAM, while Samsung's beefy Note 10.1 still only has 3 GB -- but in time, it will allow for much more powerful mobile devices. Consider that, just four years ago, it was debatable whether or not desktops running Microsoft's Windows needed 4GB of RAM. Today, even the cheapest of PCs ship with at least 4GB, and many come with 12GB or even 16GB.
Larger tablets will make more work possible
One major trend in mobile computing that is likely to play out in 2014 is the emergence of larger tablets. Mobile devices have been criticized for their inability to serve as true work stations -- even full-size, 10-inch screens are ill-suited for doing productive work. But as tablets have gotten lighter and thinner, larger screens have become possible, and the ability for 12-inch (or larger tablets) to cannibalize a larger chunk of the laptop market seems likely. The most popular laptop screen sizes are 14- and 15-inches, with 13-inch screens accounting for a sizable chunk.
Samsung is expected to roll out a 12-inch tablet running Google's mobile operating system next year, and if the form factor is successful, it isn't hard to imagine Google's other hardware partners emulating the idea, as they did with Samsung's phablets.
The demise of Wintel
For years, Microsoft and Intel jointly dominated the PC market. Intel provided the chips; Microsoft provided the operating systems. The rise of mobile computing has proven quite challenging for both companies, with Microsoft's hybrid Windows 8 operating system seeing sluggish adoption, while Intel has provided the processors for only a minority of mobile computing devices.
If the traditional PC market stabilizes around 300 million, as IDC is expecting, then both companies should have a sort of cushion. Even if they never really break into mobile, there will always be a sizable market for traditional PCs, one where both Microsoft and Intel face little competition.
But mobile computing is still evolving rapidly. Larger form factors, and more powerful 64-bit processors, will make mobile devices, mostly powered by Google's Android, far more enticing to a larger group of traditional PC users. As mobile devices become more capable, the traditional PC's worst days still lie ahead.
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