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    Tuesday, June 19, 2007

    PC VENDORS facing radical Change- Paul Weinberg

    PC vendors facing radical change

    17 June, 2007 By Paul Weinberg

    Expansion of sales outside the saturated markets of North America and Europe will alter the dynamics of the PC industry, stated Simon Yates, research vice president and research director at Forrester Research and the co-author of a new report.
    A sign of the shape of things to come, projected Forrester, is that more than 1 billion PCs will be sold worldwide by the end of 2008 and there will be a further jump of more than 2 billion PCs purchased by 2015.
    A key point made by Forrester is while it took 27 years to reach one billion PC sales, it will take only five years to reach the next billion, due to "advancing technology, lower prices and global demand on the part of a technology-aware population." Listed are the new industrial players -- i.e. Brazil, Russia, India, and China -- which will account for more than 775 million new PCs by 2015.
    Spurring sales in the impoverished regions of the North and South on the planet, stated Yates, are government subsidy programs that promote increased PC usage and particularly laptop adoption, as well as devices that are heavily discounted by the PC vendors themselves.
    "All of these countries that are pouring computers into their education systems over the ten years are going to create better educated, more technology aware workers. I think there is a huge impact on global competitiveness."
    Yates cited the example of Intel and Acer, which are jointly introducing the $200 (U.S.) Classmate PC laptop for educational markets.
    All of this means, he stated, is that PC vendors like HP and Dell can no longer introduce new hardware products on a small scale to test the market, ramp them into full production eventually and then keep adding refreshed replacements over time.
    Yates asserted that the PC industry's practice of forcing customers to frequently upgrade their hardware and coast along with incremental technical improvements will not fly in emerging markets.
    "The problem in the emerging markets is that you get one shot [with a product] because people in these countries are not going to quickly dispose every two years PCs that cost them such a high proportion of their income."
    He suggested that people in emerging markets will probably hold onto their laptops for upwards five to eight years until the machines basically die.
    "Instead of trying to innovate incrementally over time, with the same product, you are going to see [PC] innovation in terms of lots of different products from the same company, coming to market at the same time. [Vendors] will not be able to spend as much time and resources with gradual improvements to a product."
    Yates said he see vendors introducing a broader range of innovative PC products that will contain improvements in areas like battery life, displays, design and form factor.
    PC products will have to succeed quickly in the market or die, he envisioned.
    "[Vendors] will hit the market quickly, have products adopted by service providers, picked up by millions of people and then abandoned [if they do not sell.]"
    PC products will increasingly be just like any consumer electronics items that are sold in mass retailers like Wal-Mart, explained Yates.
    "You will see basic Internet connected devices with very limited port power. You will see a lot of different speed sizes, seven or eight inch displays that you never saw before because the manufacturers never saw it cost effective to build those kinds of panels."
    Yates also predicted increased sales in those markets in North America that have resisted purchasing a PC, especially low income areas, through subsidized sales in the school systems.
    "I could easily see for example low end PCs that do well in Mexico, for example, being introduced into the United States."
    IT vendors will need greater worldwide manufacturing capacity than exists currently in the emerging markets to satisfy an expected insatiable demand for PCs, stated Yates.
    "If you think about the volume that we are talking about, if this report turns out to be accurate, there are not enough plants in the world to manufacture this much stuff. [The industry] will have to go to contract manufacturers. There will be a lot of new contract manufactures that will develop out of this."
    Among the countries expected by Forrester to play a role in the industrial ramp for PCs are China, Taiwan, South Korea, Vietnam and Cambodia.
    "There is a pretty good reason why Intel and Dell are building enormous factories in Vietnam. It is because the labour costs in China have gotten to be high."
    One drawback for the channel is we will eventually have too many different kinds of products, and too many configurations being produced by the PC makers.
    "The channel wants things to be like the corporate environment. The more standardized and consistent things are, the easier it is to make a profit. By selling similar configurations you are able to get at lower costs. The more variation there is for the channel, the more difficult it is to sell."
    But standardization might also eventually occur once the dust settles in the PC, making the life of resellers might easier, he added.

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