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As IoT grows, PC popularity wanes

Recent preliminary results from Gartner, Inc. shows that worldwide PC (personal computer) shipments totaled 72.6 million units in the fourth quarter of 2016, a 3.7 percent decline from the fourth quarter of 2015. In total, for the year 2016, PC shipments totaled 269.7 million units, a 6.2 percent decline from 2015. The significance of PCs is diminishing as the smartphone trend and popularity of connected devices takes center stage. PC shipments have declined annually since 2012, while mobile broadband subscriptions have been growing by around 25 percent annually, increasing by approximately 190 million in Q3 2016 alone, Ericsson reports.

Mobile subscriptions are growing at around three percent year on year globally and reached 7.5 billion in 2016, according to Ericsson’s recent Mobility Report. The increased efficiency of smartphones is outweighing traditional PCs, making them less necessary to own. While Lenovo holds the position as the world’s biggest PC and laptop maker, it cannot hide from the fact that globally, PC sales in 2016 were down by 6.2 percent. Meanwhile, the number of mobile subscriptions exceeds the population in many countries, according to Ericsson.

"Stagnation in the PC market continued into the fourth quarter of 2016 as holiday sales were generally weak due to the fundamental change in PC buying behavior," said Mikako Kitagawa, principal analyst at Gartner. "The broad PC market has been static as technology improvements have not been sufficient to drive real market growth. There have been innovative form factors like 2-in-1s and thin and light notebooks, as well as technology improvements, such as longer battery life. This end of the market has grown fast, led by engaged PC users who put high priority on PCs. However, the market driven by PC enthusiasts is not big enough to drive overall market growth."

Ms. Kitagawa continued: "There is the other side of the PC market, where PCs are infrequently used. Consumers in this segment have high dependency on smartphones, so they stretch PC life cycles longer. This side of the market is much bigger than the PC enthusiast segment; thus, steep declines in the infrequent PC user market offset the fast growth of the PC enthusiast market."

In Ericsson’s Mobility Report, it says greater device affordability is encouraging new mobile subscribers in developing regions, while growth in mature markets is largely due to individuals adding more devices; meanwhile, PC sales are declining. What’s more, with 5G on the horizon, smartphones will be able to cater to even higher demands of service. The introduction of 5G, according to Ericsson, will accelerate transformation in many industry verticals, enabling new use cases in areas such as automation, IoT and big data.

Smartphones are becoming more dominant than PCs, but Ms. Kitagawa indicates that there is still hope for the PC market. Although the overall PC market will see stagnation, there are growth opportunities within the market such as the engaged PC user market, the business market and gaming. However, these growth areas will not prevent the overall decline of the PC market, at least in the next year, she says.

Four of the top six PC vendors experienced an increase in worldwide PC shipments in the fourth quarter of 2016, according to Gartner’s research. The top three vendors all increased their global market share in the fourth quarter. Lenovo maintained the number one position, as the company experienced shipment increases in North America and EMEA, while Asia/Pacific and Japan continued to be challenging markets.

In addition, HP remained in the second position and it has recorded three consecutive quarters of shipment growth. HP secured the top position in PC shipments in the US and EMEA, growing faster than the regional averages.

Dell also registered three consecutive quarters of shipment growth in Q4 2016. Dell continued to place PCs as a strategic business segment in commercial and consumer markets during 2016. Asus suffered the steepest decline among the top six vendors in the fourth quarter of 2016. The company has been shifting its PC strategy more toward the high-end market, which will allow it to maintain better profit margins. Gartner analysts said the falling shipment volume could be the cause of this strategy shift.

According to Ericsson’s Mobility Report, North America saw 405 million mobile subscriptions in 2016. Subscriptions associated with smartphones continue to increase, the report says, and have surpassed those for basic mobile phones. Fifty-five percent of all subscriptions are now for smartphones and, in Q3 2016, smartphones accounted for close to 80 percent of all mobile phones sold. In comparison, Gartner’s research says PC shipments in the US totaled just 16.5 million units in Q4 2016, a 1.3 percent decline from Q4 2016.

Five of the top six vendors in the US PC market experienced a shipment increase in the fourth quarter of 2016, according to Gartner. However, this was offset by a 20.9 percent decline in the ‘Others’ category, and a 48.3 percent decline in shipments by Asus.

"Similar to low-key back to school sales in 3Q16, big sales events, such as Black Friday, Cyber Monday and holiday sales are no longer effective marketing opportunities for PCs since PC purchases are generally driven by a 'need,' rather than 'want,' motivation," Ms. Kitagawa said. "PCs are not a preferred gift item any longer, as consumers gravitate toward other consumer electronics, such as virtual personal assistant (VPA) speakers, virtual reality (VR) head-mounted devices and wearables. Vendors and channels did not have high expectations for the holiday PC sales, so the marketing campaigns remained relatively quiet."

The consumer items that Ms. Kitagawa refers to – such as virtual reality headwear and wearables – fall under the IoT (internet of things) umbrella. Ericsson predicts that the number of projected IoT devices will reach 1.5 billion in 2022. This growth, according to the report, is due to increased industry focus and 3GPP standardization of cellular IoT technologies.

Europe, the Middle East and Africa saw a decline in PC shipments in 2016. PC shipments in EMEA surpassed 21.9 million units in the fourth quarter of 2016, a 3.4 percent decline year over year, according to Gartner. PC shipments to the consumer market were driven by good Black Friday sales in Western European countries, such as the UK and France, especially on traditional notebooks, ultramobile clamshells, the hybrid form factor and gaming PCs. Gartner's early estimates also show PC shipment growth in the business segment, led by Windows 10 deployments during the fourth quarter.

In addition, the Asia/Pacific PC market totaled 24.8 million units in the fourth quarter of 2016, a 3.9 percent decline from the fourth quarter of 2015, according to Gartner. The PC market was affected by two major events. First, the demonetization of the Indian currency in India led to weaker-than-expected consumer PC demand. Second, the success of China's 11.11 (Singles Day on 11 November) online shopping event gave a boost to consumer notebook sales.

Ultimately, growth in the number of connected devices is driven by emerging applications and business models, and supported by standardization and falling device costs, Ericsson reports. The traditional PC market is being swamped by the growing needs consumers have for mobility and convenience, which can be provided by smartphones and other connected devices under the umbrella of IoT.