The Hindu Business Line : Encore, in a jiffy

THE sale and shipment of the billionth personal computer (PC) in April this year heralded a milestone in the technology age. Announcing this recently, a study by the Gartner Group, the technology market research company, made a bold forecast that it will take five to six years (that is, by 2007 or 2008) for the industry to sell the next billion PCs. This forecast is bold and startling for two reasons. First, according to Gartner, it took over 25 years for the industry to sell its first billion PCs. The first Altair 8800 was sold in January 1975. Secondly, because this forecast precedes the year 2001 in which the PC sales recorded a decline — only the second time (the first one was in 1985) in the PC history. The US economy, one of the biggest users of PCs, continues to be rocked by accounting scandals and by a string of poor earnings performance from technology and other corporate majors. As this state of gloom is slated to persist through the year and the economic recovery of the developed markets is expected to be rather slow in 2003, the growth in PC sales is expected to be rather sluggish over the next few quarters.

Obviously, this is not a fanciful, but a reasoned forecast from the Gartner group based on some solid assumptions. It is predicated on the fact that the broadband markets will take off in the US and since Internet access is the key driver, the usage of PCs for Internet access may stoke the next round of PC upgrade cycle and multiple PC acquisitions. This forecast is also based on the assumption that the PC makers will address the complex issues of functionality and performance in order to remain relevant in the coming years. And finally, more than the developed markets, it is the developing markets, specially the Asia-Pacific region, which have been projected as the growth engines or the technology hotspots of the future. Given the low IT penetration and installed base, the scope for growth in these markets is immense.

But for these assumptions to hold true, the PC industry has to confront the following challenges:

Designing friendlier PCs: According to this study by the Gartner Group, out of the first billion PCs sold so far, nearly 75 per cent have been used in professional or work-related environments, while 25 per cent have been put to personal or home use. It is clear that at least in the developed markets, the next big growth engine for PCs is the personal or the so-called small office-home office (SOHO) segment. But to woo this segment, the PC industry has to design and develop friendlier PCs. While the price-performance characteristics have improved dramatically over the past three decades, the usage of PCs has not been made friendly enough to attract the home users.

The march of information appliances: Out of 1 billion PCs shipped, approximately 81.5 per cent of PCs were desktops, with the balance accounted for by laptops and PC servers. It is becoming obvious that the dominant status of the PCs is likely to be threatened by a slew of information appliances. Although there is no specific definition of information appliances, it is likely that mobile phones will pose the single biggest threat to the PC. It is expected that the mobile phones of today will slowly morph into something similar to the present day hand-held or personal digital assistants to provide a more content-rich and meaningful Internet access to professionals on the move. This trend may gather momentum and become a potent force over the next three to four years, seriously retarding the pace of PC growth.

Developing world — PC's saviour?: It is hardly a surprise that the preponderant chunk of the first billion PCs was sold in the developed countries. The study says that the US accounted for 38.8 per cent of the PCs shipped while Europe accounted for 25 per cent. However, the Asia-Pacific region, which is being touted as the PC's saviour and the fastest growing region in the next decade, actually accounted for only 12 per cent of the one billion PCs sold. There is little doubt that the Asia-Pacific has the potential to become one of the key PC markets over the next five to six years. But for that to happen, the prevailing pricing structure of PCs has to be reviewed. Compared to the disposable income of the middle-class in the Asia-Pacific region, the current pricing structure is still loaded against the consumer market and to some extent against the growth of the SOHO markets in the Asia-Pacific region. The relatively sluggish growth of the PC market in India (specially, given the small installed base of PCs) stands as a conspicuous affirmation of this trend.

maverick@thehindu.co.in

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