Worldwide PC Adoption

According to a recent report from Forrester Research, “Worldwide PC Adoption Forecast, 2007-2015,” the world is looking at a new wave of growth in the distribution of computers. At the forefront of this wave are the emerging markets, areas which were largely absent during the first quarter century of the PC. Expanding into these markets will present the PC vendor industry, as a whole as well as its constituent players, with numerous challenges.

Forrester’s research indicates that by 2008 there will be 1 billion computers in use throughout the world. This number, which includes both business and personal computers, will reach 2 billion by 2015; what took 25 years to attain will be doubled in seven. Of the first billion, the United States is by far the largest consumer, owning 178 million; at a distant second is Japan with 45 million. “Mature Western European countries like Germany, France, and the United Kingdom had 27 million, 20 million, and 22 million, respectively.” Over the next five years factors including falling prices and rising incomes in countries such as Brazil, Russia, India, and China (BRIC) will increase adoption in these regions. Forrester predicts that by 2015 the BRIC countries will account for more than 800 million new computers between them. These fast-growing emerging markets will provide fertile ground for vendors and require strategy adjustments on their part; it will be markets where access to technology has so far been absent which, “will define the PC industry in the long-term.”

The emerging markets, defined by Forrester as, “countries with less than 10 percent overall adoption,” are in a unique position and present vendors with both opportunities and challenges. Forrester explains, they “have the chance to leapfrog the quarter of a century of technology development that the mature computing markets had to endure to get the right computing tools for their people at dramatically lower cost.” However, while ripe for sowing the seeds of consumption in, the business model that served the rest of the world for a quarter of a century may not be applicable here. “Reaching the first billion PC users took a quarter of a century of technology investment and development, plus a lot of in-the-field testing by buyers whose expectations of the platform increased with each incremental generation of technology. If they liked what they saw, they’d go out and buy a new one every few years. If they wanted to be the first to have it, they would pay a premium. This dynamic gave the whole PC industry valuable insight into capabilities that drove replacement behavior and pretty accurate timelines about when we could expect it to happen.” What vendors should expect in the new markets is that the old model may not apply.

Forrester points out that, “To reach new potential PC users in emerging markets, vendors won’t have the luxury of introducing products on a small scale to test the market before going into full production. The economics will force suppliers to focus on bringing volume to market quickly at a much greater risk.” As an example of the risk Forrester uses a September 2006 coup in Thailand which placed in power a new government with less interest in the One Laptop per Child program. In addition to the volatility of the market Forrester suggests the unknown life cycle for machines in the new markets will have an impact. They note, that while no one knows, “it is probably safe to assume refresh cycles will start out long and shorten gradually in the following years. The long life cycles may make it easier to optimize supply chains around specific systems, but it won’t help suppliers sustain revenue growth through sales.”

In order to rise to the challenges Forrester suggests, among other things, that the PC vendor community specifically design and produce hardware form factors for the new markets, work on “low-cost, relevant software packages that will redefine education,” and develop “partnerships to build connectivity infrastructure in disconnected regions.”

So what does all this mean? “Clearly, the challenges around planning and execution in this kind of market are totally different than the way we currently think about the PC industry.”

A more complete version of this post, including links to market research, can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the PCs & Peripherals section of Northern Light’s Internet & Information Services Market Intelligence Center.

And in the following articles:

Acer Cites Vista as Reason for Lowered Sales Forecast
ars technical, June 15, 2007
The world’s third-largest PC maker, Acer Inc., announced yesterday that it was scaling back its projected growth to between 30 and 40 percent for this year. Acer chairman J.T. Wang made the announcement to the company’s shareholders yesterday, placing most of the blame on Windows Vista. According to Wang, Vista has failed to spur PC sales, and potential buyers are staying away from the operating system until “software compatibility issues” are repaired.

Dell to Use Store-Sale Model to Boost China PC Sales – Report
Forbes, June 13, 2007
US firm Dell Inc, which became one of the leading personal computer brands in China by selling direct to businesses and consumers, will soon take its first steps to sell inside selected retail stores across the country, the South China Morning Post reported, citing Steve Felice, president for Asia-Pacific and Japan operations.

Global PC Sales Reaching Billions
Macworld, June 12, 2007
Analyst firm Forrester forecasts there will be more than two billion PCs worldwide by 2015, with more than one billion of these in use by the end of next year. New research from Forrester predicts a dramatic growth in PCs, particularly in emerging markets, with a worldwide compound annual growth rate of more than 12 per cent between 2003 and 2015.

Dawn of the Ultra-Mobile PC
BusinessWeek Online, May 31, 2007
Ready or not, here come the ‘tweeners. Palm and its Foleo are just the latest evidence that the electronics industry is determined to create a new category of mobile computing devices. Samsung Group, Sony, Nokia Corp., HTC, Fujitsu, and Vulcan Portals have also introduced or previewed products that are smaller than laptops yet larger than smartphones. The idea: offer businesspeople something very small—pocketable, in some cases—that’s an alternative to carrying a laptop around town or on a short business trip.

In-Stat: Vista Not Goosing PC Sales
PC World, May 23, 2007
Windows Vista’s official release earlier this year may have distorted PC sales in the last six months, but it is unlikely to accelerate the market overall, a market research firm said Wednesday. Scottsdale, Az.-based In-Stat said its research confirms earlier reports that the PC market in the last three months of 2006 plummeted, despite Microsoft’s “Vista Express Upgrade” coupon program that made buyers of PCs with XP on them eligible for a free or heavily-discounted upgrade to Vista.


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