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Smartphones and Phablets Compete with PC Spending

The outlook for personal computer (PC) shipments continues to improve slightly, as competition from other devices eases in some markets, upgrades to new models boost demand, and economic conditions around the world stabilize or improve somewhat. But many challenges still remain.

The decline in PC volume since early 2012 is expected to linger throughout 2016, with later years offering few opportunities to boost volumes as economic issues and other consumer electronic products sap the growth potential, according to the latest market study by International Data Corporation (IDC).

In the near-term, expectations for PC growth within the fourth quarter of 2015 and early 2016 were already fairly low, as notebook computers have struggled with competition from very capable media tablets and feature-rich smartphones or phablets.

The impact of falling commodity prices and foreign currencies has further depressed demand, and the ability to upgrade older hardware to Windows 10 or Linux has provided an option to further stretch the life of older PCs.

More Market Development Hurdles

Retail inventory clearance, which had been a challenge for much of 2015, also continues to depress demand from channels – particularly as the market shifted out of the seasonally high-volume fourth quarter into much lower volume first quarter of 2016.

These factors have reduced the outlook for 2016 by a couple percent to a decline of 5.4 percent for the year. The outlook for later years has been reduced by about one percent – IDC anticipates some positive growth in 2018, but there will be additional small declines in several quarters.

Although competition from tablets in general has decreased, with volume falling 10 percent in 2015, the detachable 2-in-1 tablet market was invigorated with new large-screen models targeting PC replacements. The volume of these new products more than doubled in 2015, though that was still under 6 percent of PC volume.

Combining detachable tablets with PCs, the market would still decline about one percent in 2016, and volume would remain well below peak PC shipments from 2011, but the market could return to low-single-digit growth beyond 2016.

Few Remaining Market Segments with Growth

"PCs remain an indispensable part of the tech landscape," said Loren Loverde, vice president at IDC. "However, replacements continue to be postponed, and future shipments increasingly depend on replacing older PCs. Detachable tablets and phablets will remain formidable competitors to traditional PCs throughout the forecast."

Despite the constraints on overall growth, ultrabooks and convertible notebooks are expected to grow substantially by 2020, with convertibles more than doubling and ultrabooks increasing by over 70 percent while all-in-one desktop volume will increase by more than a third over the same time.

In addition, volume of notebooks with screens smaller than 14 inches will continue to grow, as will lower-priced PCs -- in fact, the outlook for Chromebooks remains bright. The largest PC vendors are still well positioned to consolidate share and they can grow market share if they leverage these product trends.

In addition to specific devices, IDC believes that the SMB and education segments will do better than the overall market, There have been indications of faster commercial adoption of Windows 10 than of past operating systems, and that could support some growth in the medium term.

Similarly, access to computers and the public internet for students remains a priority, and will drive projects across regions – even though constrained local government spending may limit some projects.

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