With personal-computer (PC) shipments showing a gradual decline, will tablet shipments follow the demise of PCs?

Bloomberg News reported on March 05, 2014 that according to one of the renowned information technology research firms, IDC, worldwide personal-computer (PC) shipments are expected to decline by a steeper-than-forecast of 6.1 percent in 2014 (295.9 million expected in 2014, versus 315.1 units actual in 2013) due to the recent currency turmoil that has shaken many emerging economies. An earlier forecast back in January 2014 by IDC Research was showing a moderate forecasted fall of 3.8 percent in 2014, and growth of less than 1.0 percent in 2015. With the revised March 2014
estimates, IDC Research now expects declines will persist through 2018.

The decline in the overall growth outlook for PC shipments has been largely driven by Asia, which has seen several political changes, and slowing consumer demand. The political events in Thailand, along with current account deficit woes in India, and Indonesia have largely curbed spending demand for big-ticket items such as PC upgrades, new server installations among others. According to IDC Research, the 2013 actual global PC shipments fell by 9.8 percent, led by an 11.3 percent decline in emerging markets.

The decline in PC shipments is hardly surprising, given that other comparable devices, which offers portability, and mobility have override some of the market share for desktops and laptops, which used to dominate the PC landscape. The growth in tablet PCs have been showing quite a phenomenal rise in the past, largely driven by the availability of various varieties, and the convenience of not having to carry a relatively heavy device such as a laptop while on the go. Moreover, the functions available on the tablets are equally comparable to that of the laptops, with the exception or perhaps a physical keypad on the laptop device which offers ease of usage among some users, versus a touchscreen keypad on the tablet PCs, where some might find difficulties in getting used to typing formal documents on the tablet screens.

Although tablet PCs have increasingly made inroads into the larger PC market, the growth momentum has been showing a declining trend as more low-end devices are being launched, and consumers are not frequently replacing their old tablet PCs, in favour of the newer devices. This is according to a March 06, 2014 press release by IDC Research which showed that the total tablet market, inclusive of both tablets and 2-in-1 devices, is forecast to grow 19.4 percent in 2014, but is still far from the actual 2013 growth rate of 51.6 percent in 2013.

A breakdown of the different segments (consumer, and commercial) of the tablet market forecast is as follows:

Chart showing the total tablet forecast 2013 - 2014 - Mar 10 2014

Source: IDC Research

As readers might have noted from the table, one of the major highlights is the decline in the forecasted consumer tablet demand for 2014, which is expected to decline by 3.4 percent from the actual 89.0 percent growth in 2013 to an estimated 86.0 percent growth in 2014. Researcher, IDC attributed the decline was due to the slowing consumer purchases as hardware iterations slow and the installed base, particularly in mature markets continues to increase.

Despite the expected slowdown in tablet PCs take-up rates, average selling prices (ASPs) were showing a slower rate of price erosion, which could provide a relief for many tablet PC contract manufacturers who are increasingly seeing their manufacturing margins declining for the past two years. According to IDC Research, in 2013, ASPs declined 18.3 percent from the previous year, and in 2013, they declined by another 14.6 percent. The gradual pace of decline in price erosion has also led IDC Research to predict a marginal price erosion outlook of 3.6 percent in 2014, which is quite significant if one were to compare the 2014 forecast (3.6 percent) against the actual 14.6 percent price erosion seen in 2013. Analysts at IDC Research believed that ASP declines are expected to slow down for several reasons including the growth of higher-priced commercial shipments, which will offset some of the declines shown in the consumer space, and a general movement by consumers away from ultra-low cost products as income and affluence levels starts to gradually increase.

With the recent trends that are taking place in the competitive PC landscape, corporations, and supply chains might want take a step back to relook at the commercial tablet PC shipment outlook for 2014, which is not displaying the same trends as compared to the declining outlooks in the rate of consumer PC shipments, and the larger PC market itself. Many corporations and businesses have increasingly been turning to tablet PCs, and other mobile devices, including smartphones to perform most of the basic organisation functions, and are gradually moving away from high costs purchases such as desktop, laptop, and server upgrades. With the increasing movement towards convenience, portability, and cloud storage, corporations are finding low cost office solutions which can deliver an equal, if not, better productivity improvements just like by switching to the use of tablets, telecommuting, and other cost-saving solutions. It is a widely known fact that the PC shipments outlook is likely to diverge further, while mobile devices and wearable technologies will increasingly catch on with the latest technology trends.

The mobile technology adoption rates have shown to be somewhat resilient, as compared to the desktops and laptop PC spaces, but issues regarding network security, and data protection that are applicable to tablet, and mobile technologies have taken much prominence lately, especially with the recent reports of network data breaches in organisations such as US-based retailer, Target Corp. (TGT), and other organisations. This represents risks and more efforts have to be made in ensuring minimal disruptions to organisations due to unauthorised security breaches by criminals seeking to exploit the vulnerabilities surrounding the use of mobile devices to access sensitive information.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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