THE PERSONAL COMPUTER AT 25 The Magic Lives On

Twenty-five years ago, electronics nerd Ed Roberts in New
Mexico, USA, put together a do-it-yourself “personal computer” kit.
His little-known company, Micro Instrumentation and Telemetry Systems, made
radio transmitters for model airplanes–and became the launch-pad for the world’s
first PC.

That
was the Altair, and the do-it-yourself kit for the “world’s cheapest
minicomputer” featured on the cover of Popular Electronics magazine back in
1975. The catch line gave birth to roller-coaster ideas.

From that DIY kit to the IBM PC in 1980 was a slow journey.
But at the end of 1981, Time magazine replaced its traditional Man of the Year
with a Machine of the Year–the personal computer. Somehow, a few visionaries
were able to see a future where the PC would be everywhere, changing the way
companies worked.

There was no looking back, except perhaps for IBM itself. But
more on that later. From a worldwide base of 500,000 in 1975, there are some 515
million PCs today, at an annual revenue of nearly $250 billion.

IBM’s PC, and its clones, initiated vast economies of
scale, and the era of business PCs began. Between 1980 and 1985, the worldwide
PC sales jumped from 1 million to 10 million units, and by 1990 the figure had
soared to 24 million. And with each passing year, the price of the PC dropped,
while the power of the machine increased–roughly according to a
“law” stated by Gordon Moore of Intel, that processor power would
double every 18 months or so. “Moore’s law” has survived over the
decades.

Nothing
succeeds like success. The spirit of enterprise and innovation brought in a new
generation of entrepreneurs–Michael Dell, et al.–who transformed the small
market into an industry. Companies like HP, Compaq and Apple joined the fray of
manufacturing and selling PCs to the corporates. South Asia’s “electronic
cottage industry”, rapidly growing into mega-OEMs especially in Taiwan,
further fueled growth to the extent. Today, there are nearly 560 PCs per 1,000
people in the US–which is expected to increase to over 770 by 2005.

If the 1980s saw the corporate PC boom, the 1990s saw the
home and small business bang. This “consumer” segment became more and
more the focus of PC vendors. The advent of the Internet shook everyone up and
changed the PC horizon. The PC got networked, and went beyond the enterprise,
deep into the home.

Worldwide,changes in datacom set a new agenda for the PC industry. The power came into the
hands of consumers. Across the millennium edge, the desktop personal computer
began to morph into a digital entertainment center, with the Web as the center
of attention.

The Internet as driver

IDC projects global personal computer growth between 1998 and
2004 at 39% for desktops, and 24% for notebooks. In the Asia-Pacific region, the
Indian market has been experiencing the highest growth, despite very low
notebook penetration. The 1999 to 2004 growth has been projected at 47%, as
against 16% for the Korean market and 12% for the Taiwanese market.

US and Worldwide PC Market
Growth

 

1975

1980

1985

1990

1995

1999

2000*

2002*

2005*

US PC Sales (#million)

0.04

0.8

6

10

20

37

42

51

64

Worldwide PC Sales (#million)

0.05

1.1

10

24

56

107

125

160

217

US PC Revenues ($ billion)

0.05

1.5

15

24

53

77

80

90

104

Worldwide PC Revenues ($billion)

0.06

3.6

30

71

151

226

243

286

357

US PC Installed Base (#million)

0.04

1.4

19

51

92

141

153

180

222

Worldwide Installed Base (#million)

0.05

2.1

33

99

227

439

514

684

1001

The annual PC sales figure is the base benchmark figure for
an infotech industry, and the PC is driving growth in India. Of course, this
growth has been on a small base, but today, the base is a respectable
million-plus–and the growth is keeping up. Also driving this growth is the
ongoing liberalization in India. And the considerably lower duty for components
has encouraged most companies–including the top MNCs, Compaq, HP and IBM–to
assemble computers locally. The third big driver–which should become the top
driver in the year ahead–is connectivity. The 300 licensed ISPs will help, but
what will really make the big difference is bandwidth, which is still severely
limited.

The
lowering cost of Internet services has been pushing PC volumes up, making prices
of PCs affordable both for homes and businesses. Says Amitabh Kumar, director
(operations), VSNL, “The Indian Internet market has shown over 250% growth
in the last year, with Internet accounts estimated at 1.2 million by July
2000.” A basic corporate desktop from IBM is down to Rs 36,500, and a
Compaq Presario 5000 B1 home PC costs Rs 42,990. Every year, there has been a
steady decline in the average selling value (ASV) of a PC. Between March and
June 2000, the ASV declined from Rs 46,197 to Rs 44,065. This has affected
vendor profitability, resulting in some shakeouts. Companies like PCL and
Unicorp were hit and failed to stay alive, despite aggressive–and perhaps
unviable–pricing.

For companies like Zenith, Wipro and HCL, survival came
through a long-term strategy of maintaining optimal inventory, careful sourcing,
the creation of well-distributed channels and brand-building. Further, vendors
rested their hopes on unit sales, to maximize their revenues. Raj Saraf, MD,
Zenith, says the key to survival is in being very focused. “Our strategy is
to concentrate only on PCs rather than diverting into different areas,” he
says.

Desktop to the home

Though vendors such as DCM, HCL and ICIM had started selling
‘micros’ (later-day PCs) along with ‘minis’ (Unix or proprietary
machines) as early as 1983, their clients were mainly limited to big corporate
houses.

As the Indian computing scenario gradually changed from
mainframe environment to client-server, PCs became important. With the advent of
application software packages in areas like accounting and page makeup, PCs
became even more critical for productivity. The early part of the 1990s saw a
sharp rise in the use of word processors and spreadsheets in administrative
jobs. And along with the big corporates, the SME segment became a major consumer
of PCs.

The late 1990s saw the entry of Indian homes as the new PC
consumer segment. With this, the stage was set for the PC to be transformed from
being a mere office tool to becoming a tool for infotainment–for the first
time, the PC began to be viewed as a consumer product.

This also brought a major shift in the growth pattern of the
industry. Between 1996 and 2000, the annual growth, by value of PC sales,
increased from 5% to 45%. This steep rise was mainly driven by growth in the
home segment. IDC records only 10,226 unit sales to the home segment in 1994 (of
a total of 217,594 units sold)–less than 5%. In 1999-2000,
home PC sales were 30% of total sales.

Surviving the mobile era

The role of PCs is changing fast, both in terms of functions
and specs. Information storage and distribution are no longer the exclusive
domains of the PC. Though the Web economy is still in its infancy, it has
already propelled the growth of handheld devices and thin clients as the PC’s
competitors–or companions.

Country-wise PC shipments 
Asia-Pacific*

Country

1999

2004

CAGR (%)

PRC

4,937

15,235

25

India

1,102

7,525

47

Korea

2,191

4,967

18

Australia

2,098

3,021

8

Taiwan

1,060

1,886

12

Others

2,991

6,380

16

Total

14,379

39,014

22

*Excluding Japan, figures projected for 2004 India will rank high in top growth rates even as China will be the number-one PC country in APAC Source: IDC India

PDAs, WAP-enabled cellular phones and ultra-light laptops are
changing corporate computing and communications. In a few years, as packet
switching replaces circuit switching, all forms of communication will become
IP-based. The Web, supported by millions of robust servers as well as clients
working as servers–in the Napster-Gnutella peer model–will form the
backbone. In the home segment, MP3 players, video-game consoles and various
information appliances will lead the way beyond PCs.

So what will all these will lead to? A dominant view is that
the era of ubiquitous computing is at hand. Computing will be Web-centric, not
Windows-centric or desktop-centric. The PC will lose its importance as the
preeminent Web access device. But it’s way too early to write the PC’s
obituary.

In terms of specs, every quarter, the PC is getting faster
and packing more memory and storage. Tiny notebook computers have moved from 2
to 4 to 8 to 12GB as their basic storage in four years. Wintel still dominates,
and will probably continue to do so, AMD/Transmeta and Linux notwithstanding.

For Linux as PC OS, it’s an uphill marathon. IDC’s PC
Storeboard report for the April-June 2000 quarter suggests that Windows 98 was
installed on over 80% of PCs sold through dealer channels. Well over half the
PCs sold shipped with Pentium III processors at over 500MHz. A RAM size of 64MB–with
a market share of 67%–was the most popular, and about half the PCs shipped
with hard drives bigger than 9GB.

PC vendors are also beginning to look at design: desktops and
notebooks are becoming sleek and attractive, and not just in the consumer space.
The PC is shedding its image of a flabby, plain beige-box with bulging monitors
occupying a lot of space. Of course, design has really been the forte of Apple,
which continues to stun the world with its pathbreaking curves and colors. Two
years after the colorful, transluscent iMac, there’s a stunning G4Cube. No PC
vendor has come up to Apple standards in design so far, but many are making bits
of effort. Even Indian companies like HCL are giving much attention to the way a
PC is packaged.

Global PC demand stays healthy. IDC reports healthy worldwide
April-June Q2 2000 PC demand, with 15% unit growth over the same quarter last
year. There’s a severe components shortage, primarily due to higher
consumption and demand. For instance, there’s more than 70% growth in PC RAM
demand, due to PC numbers growth but more due to a near-doubling of RAM with the
average PC over two years.

A PC plus era?

If the business press has been writing about the "post
PC era," analysts disagree. One report says, "Such a ‘Post-PC Era’
is unlikely in the next five to seven years, despite the tremendous information
appliance proliferation in homes and businesses all over the world." The
report adds that information appliances are new opportunities for the PC
industry, because they will use PC hardware and software, and link to them. For
instance, the ubiquitous Palm series is so successful partly because it works as
an effective PC companion, "hot-syncing" its information in a flash
with PCs and notebooks.

PC microprocessors, PC peripherals like disk drives, printers
and pointing devices, and PC hardware technologies like flat displays, touch
panels and memory cards will be used in all those information appliances too.
They’ll also use PC-derived software, and IP technologies to communicate. And
if they take any sales away from the PC market, they’ll also push up demand
for millions of PC servers to serve them with information on the fly–information
to support all those information appliances.

So are we talking of a mixture of thin clients and fat PCs,
in the years ahead? In all probability, yes. Those who’re waiting for a
post-PC era have a very long wait ahead.

A DQ report with inputs from INDRANIL
CHAKRAVORTY

in New Delhi

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