The PC Industry Really Falls Apart

The predictions that the PC era is coming to an end are supported almost every time an important piece of research on the industry is released. Research firm Gartner has issued its new forecasts for the industry, and the data once again raise the challenge of what will eventually replace the desktop and laptop.

PC sales are not only under pressure from new devices, the economy has cut into growth as well. Gartner lowered its growth forecast for the global PC market in 2011 to 3.8% from its earlier forecast of 9.3%. The company said slow sales in Europe and the U.S. were partly to blame.

It may be hard to agree there is trouble for an industry that will ship more than 400 million units worldwide next year. Those sales, however, are eroding because of the popularity of tablet PCs and smartphones. Apple (NASDAQ: AAPL) is considered the primary cause of this sea change, along with the availability of Google’s (NASDAQ: GOOG) Android OS.

The advance of the tablet and smartphone could be blunted for several reasons. One is based on the failure of the last major assault on the mainstream PC. Netbooks made in Asia and copied in the U.S. sold for less than $300. However, the public found the devices to be underpowered. The PC industry cut prices on machines with better processors, and the netbook has been nearly knocked out of the market.

The PC sector now gets a chance to adapt again, in an effort to keep its high growth rate. Its option will be the same as the one taken to ward off netbooks. PCs will need to have improved processors in smaller machines. This means that notebooks must be upgraded, and those upgrades have to extend beyond processors to displays and graphics capabilities.

PC companies are fortunate that the price of processors has dropped as their power has risen. Tablets have excellent displays, but they do not yet have the processing capacity that most powerful PCs have. Smartphones have neither high-end processors nor large displays. Their benefit is their portability.

Wireless broadband will be almost universal within a few years. That means that any smartphone, tablet or PC that is light enough and small enough will offer consumers a choice. The criticism of the PC industry, beyond Apple, recently is that it has been slow to adapt to consumer preferences. Now, the sector has one last chance.

Douglas A. McIntyre