As Japanese Move Away From PCs Will US Consumers?

Just when shares in Hewlett-Packard (HPQ), Dell (DELL), and Apple (AAPL) were doing so well, it appears that, in Japan, consumers are moving toward game consoles and smart phones for their daily digital needs. It makes some sense. The level of processor power in products like the Sony (SNE) PS3 is remarkable, and the highest end smartphones can do everything from connecting to the internet to running PC applications. The new Google (GOOG) phone may extend the number of applications that will run with some ease on handsets.

According to The Associates Press "the PC’s role in Japanese homes is diminishing, as its once-awesome monopoly on processing power is encroached by gadgets such as smart phones that act like pocket-size computers, advanced Internet-connected game consoles, digital video recorders with terabytes of memory."

There is no reason that this trend will not move to the US. Almost 200 million people have accounts with AT&T (T) Wireless, Verizon Wireless, Sprint (S), or T-Mobile. High-end phones from Apple, Motorola (MOT), Nokia (NOK) and Samsung are using 3G networks and better processors to run photos, video, data, and music downloads.

The purchase of PCs is actually dropping in Japan. The AP reports overall PC shipments in Japan have fallen for five consecutive quarters, the first ever drawn-out decline in PC sales in a key market, according to IDC. The trend shows no signs of letting up: In the second quarter of 2007, desktops fell 4.8 percent and laptops 3.1 percent.

With handset sales running over one billion a year and PC retail prices as a potential barrier to purchases in countries like China and India, look for the $200 smartphone to begin to steal sales from the PC in earnest over the next two or three years.

Douglas A. McIntyre