PCs, Tablets, and Mobile Phones are not Dying (and Will Continue to Present Voiding Challenges)

Folks,

Looks like Patty and Rob are on another adventure.  Let’s look in ….

Patty had been driving the same 2001 Saab station wagon since college. It had been a great car, but, with almost 200,000 miles on it and its outdated safety features, perhaps it was time for a change. Both her and Rob’s parents had been bugging them about getting a new, safer vehicle for a while. Finally, for her birthday, both sets of parents chipped in to give her a significant down payment on a new car.  They even suggested which specific car she should get. It was a car with one of the best safety records, not an insignificant concern for doting grandparents.  The manufacturer has a goal of no deaths in its automobiles by 2020.

As Patty and Rob went shopping, they were overwhelmed by the features that 2016 autos have. Detections of cars in the “blind spot,” warnings when the car leaves the lane, warnings and prevention from backing in to something, reading the speed limit signs, pairing to smartphones, the internet, and on and on.

“Patty, these aren’t cars; they are computers that you can drive,” Rob commented.

“Actually this car has 13 computers,” the salesperson chuckled.

“What is the soonest we can take the car home?” Rob asked, expecting it to be 3 or 4 days.

“You can take it home in an hour,” the salesperson affirmed.

In an hour, Patty and Rob were driving home in their new car, amazed at its capabilities as a “computer on wheels.”

“Rob, look at this. As we pass the speed limit sign, the speed limit is shown on the speedometer,” Patty exclaimed in amazement.

They stopped in their driveway and played with the car’s features for 30 minutes, streaming music from their smartphones, connecting to the internet, and changing many modes on the dashboard display.  It was more fun than their first time playing with a tablet.

lasky1

Figure 1.  Patty and Rob’s new car has 13 computers

Two days later, it was Monday and Patty, Rob, and Pete had been asked to see the Professor for a brainstorming session.  Recently, as Patty’s career had skyrocketed, she had been working with the Professor less and less.  The trio agreed to meet in Patty’s office so they could head over to the Professor’s office together.

“Hey, this is just like old times!” Pete exclaimed.

“I agree,” added Patty, “I miss some of the adventures we used to have.”

The professor welcomed them in.

“I hope all of you had a chance to review the material on the many links that I sent you,” the Professor began.

They all murmured that they had.

They reason I asked you to come is that I am going to be interviewed on national television, The topic is, ‘The Death of PC, Tablets, and Smartphones.’ I thought you all might be able to help me prepare.

They all though in unison, “Us help the Professor prepare?!”

“What are your thoughts on the ‘Death of the PC,’” the Professor asked his humble mentees.

“One of the links you sent has shows PC sales declining,” Rob said.

Lasky2Figure 2. PC sales peaked around 2011 and have been declining since then.

“But, do you think it portends the end of PCs?” the Professor asked.

“This is something I have thought about ever since you sent us the links.  I think the ‘death of the PC’ people are missing some key points,” Pete replied.

“Such as?” the Professor encouraged.

“When I was a teenage we got an IBM PC XT. It had a 10MB hard drive. We replaced it in three years,” Pete began.

“Why did you replace it?” Patty asked.

“It didn’t have enough memory or processor speed for the new games.  The new PC had a 200MB hard drive. We kept that one for about 3 more years and the cycle repeated,” Pete answered.

“And what about today?” the Professor asked.

“My parents have a six-year-old computer. They recently complained they needed to upgrade it because the audio plug is worn out, some keys on the keyboard are intermittent, and it doesn’t have enough USB ports. No problem with the memory; it has 6GB of RAM and a 250GB hard drive,” Pete answered.

“So, it did not run out of memory or computer speed?” the Professor asked.

Patty interrupted, “I remember the Professor and I talking about ‘the constancy of memory metrics’. The argument was that a photo is about 1MB, a song 5MB and a movie about 5,000MB.  These metrics are approximately constant. Initially, the size of these metrics overwhelmed early computers, but now these memory metrics are small compared to the capability of current technology. The impact was that early computers had to be changed often, because people wanted to store more photos, songs, etc., but now, with computers having 1TB of memory, getting a new computer for this reason is not so compelling.”

“Maybe with the exception of some new video games, but admittedly this is a small part of the market,” Rob added.

“Well, is the PC market dying then?” the Professor prompted.

“No way!” Pete jumped in. All of us use our PCs for hours each day.  Am I the only one longing for my PC when I answer an email from my smartphone?” Pete asked.

They all chuckled.

“So, it seems that we are concluding that, today, the performance requirements for PCs, mostly laptops, have leveled off and upgrades are needed less frequently. These upgrades are often driven by mechanical failures such as connectors and keyboards, not necessarily the need for more memory or faster processor speed.  It is natural then to expect sales of PCs to level off and even go down some as, in addition to these points, the market has reached saturation.  Everyone who needs a PC has one,” the Professor summed up.

“Yeah, and the 238.5 million sold last year is not really small potatoes,” Rob added.

“What about tablets? Are they going away?” the Professor asked with a mischievous smile.

“Again, the data show a downward trend, but I’m not a believer that they are going away either,” Pete commented.

Lasky3

Figure 3.  Tablet sales are declining.

“I think a similar thing is happening here,” Patty mused. “Tablets are so powerful that there just isn’t an incentive to purchase one frequently. We have an iPad II that we bought in 2011 that we still use, although it doesn’t run some of the newer games.”

“And they sure are popular with our boys. We have to limit the time they spend on them,” Rob added.

“What about people using large smartphones instead of tablets?” Patty asked.

“That has definitely cut into tablet sales. Some of the new smartphones are so big that they are almost comical.  They are as big as some of the mini tablets,” Pete opined.

“Professor, I thought one of the links you sent was fascinating: 4.6 billion mobile phone users in a world of 7.3 billion people!” Rob exclaimed.

“I have a friend who works in humanitarian engineering in third world countries. He tells me that people in some places he visits, will go without food to have a cellphone. In the past, communicating with relatives 60 miles away was a one week commitment of time, because of the primitive transportation. Now, they can do it instantly,” the Professor shared.

“What about the fact that there are as many mobile phones as people on the earth,” Pete exclaimed.

“I guess some people have more than one,” Rob suggested.

“So are mobile phones dying?” the Professor asked.

“I think it is the same argument. When I was starting out at ACME, I had a mobile phone that could take photos, but the quality was really poor. By 2010 the photo quality was good, today it is excellent. I hardly ever take a camera with me, my smartphone photos are excellent,” Patty said.

“So, I’m guessing you don’t need to get a new smartphone as often because the technology has now stabilized, and improvements are only incremental?” the Professor asked.

“Precisely,” Patty responded.

“I think we agree; PCs, tablets, and mobile phones are here to stay, but their sales will be flat or slightly down due to market saturation and technology maturity.”

“Here, here,” Pete chuckled.

“Where do you see electronics growing?” the Professor asked.

Patty and Rob then shared their exciting experience in buying a new car and all of the electronics it has.

Pete then chimed in, “Don’t forget the internet of things (IoT).  I think this is the future of electronics growth, but it is not one device.  The number of devices is innumerable – and growing! And I think it will help electronics grow even faster than in the past.”

They discussed IoT for quite a while and then Rob had a thought.

“Bottom terminated components and especially QFNs will be with us for a long time as they are in all of these devices.  So the work we did for Mike Madigan on voiding should have a lasting impact,” Rob posited.

“Patty, you need to do something about Rob. He’s becoming too serious,” Pete teased.

Everyone laughed at that and got up to leave after what they all felt was a fruitful meeting.

Best wishes,

Ron

Is the PC (or Tablet or Smartphone) Dead or Dying?

Folks,

We hear, on a regular basis, that the PC is dead or dying and will be replaced by the tablet. More recently, there is news that the tablet is starting to fade and even, most recently, that the smartphone is on the wane.

What is the truth? Many articles skirt around the issues, but few discuss them in detail. I believe that the driving forces behind the slowdown in sales of all of these electronic marvels can be understood by five factors:

  1. Memory Constants
  2. The asymptotic improvement of features
  3. Feature fatigue
  4. Device changeover hassle
  5. Cost

Let’s discuss them one at a time.

Figure 1. According to some, tablets are replacing PCs.

Memory Constants

My family purchased our first computer in 1986, an IBM PC XT. It was one of the early PCs that even had a hard drive. We opted for the biggest hard drive available, 20MB. The PC also had 512 KB of RAM. The Lenovo X230 PC that I am writing this post on has a 250GB solid state hard drive and 18GB of RAM, over 10,000 times as much of both types of memory as the XT. By 1989, the XT could not run the latest software, especially games like Where in the World is Carmen Sandiego? It didn’t have enough memory, so my kids were protesting. As a result, our family upgraded about every three years as games, operating systems, and office software demanded it. However, this trend has slowed dramatically. One of the reasons for this is what I call Memory Constants. One Memory Constant is that a photo is about 1 to 2MB of memory, as is a book. A song is about 5 MB. A movie is about 5,000MB or maybe as much as 15,000MB in high definition. Certainly a photo can be more than 2MB, but most of us shoot photos with a smartphone and these excellent photos are in this memory range. My 1986 PC XT could only store 10 photos or books and only 4 songs; my current PC, 10s of thousands of photos, books, or songs. With video streaming, very few people store movies on their PCs or tablets. So, with the tremendous amount of memory that PCs and tablets have, and with the advent of low cost USB memory sticks and external hard drives, upgrading a PC or tablet for lack of memory is uncommon.

The Asymptotic Improvement of Features

In 2005, I went to a blogging workshop with my good friend, Rick Short. At the workshop, Rick took a few photos with his smartphone. The photos were of so poor quality as to be unusable. Today, smartphone photos are of such good quality that many people have retired their cameras. Almost all features on PCs, smartphones, and tablets have asymptotically approached an excellent level of performance, such that a newer version just doesn’t have a striking benefit. In addition to a slightly better camera, the latest smartphone screens are a little sharper, but hardly enough better to justify getting a new unit. Admittedly, some new features, like Amazon’s 3D Mobile Phone might tempt someone to take the plunge. But, with so many features already on devices, additional new features just aren’t as compelling.

Feature Fatigue

Most of our devices have so many features that a new device isn’t as compelling as it was when smartphones, for example, did not have cameras or could not readily access the internet. In addition, many new features are added by software upgrades to an old unit. Combining this with the fact that people are increasingly reluctant to learn the myriad new command and sequence nuances for all the software on their devices and we have a general reluctance to upgrade. Of course, there will always be those that want the latest features, but they are becoming more and more like statistical outliers. So feature fatigue can limit sales of new units.

Device Changeover Hassle

It is a big deal to changeover a PC, smartphone, or tablet to a new one. It’s a lot of work, and if you are switching from say an iPhone to an Android, with unfamiliar software, it is a real hassle.

Cost

Many people now own a PC, smartphone, tablet, and e-reader. Not too many years ago it was just a PC and a mobile phone. Considering cost alone, it would be unreasonable to expect many people to constantly upgrade three or four devices.

Summary

To me, some of the headlines are almost comical, such as “The PC is Dying.” All of the personal electronic marvels that we depend on are alive and well; we are just starting to keep all of them a lot longer. One other thing to note: the PC and the tablet do not compete as much as a large smartphone competes with a tablet.

Cheers,

Dr. Ron

Wistron On the Move

We’ve said it before, we’ll say it again: EMS companies don’t sit still.

Notebook ODMs, faced with falling demand and profits, are not going gently into the good night. Flextronics dumped the PC ODM business a couple years ago to concentrate on higher margin, higher growth markets. Sanmina did the same. Now Wistron is pushing into medical as well. Others are sure to follow.

 

HP PC Spinout Effects, by the Numbers

Here’s the first report I’ve seen that gets into the nitty-gritty behind the possible supply chain effects of HP’s PC spinoff/sale.

TrendForce was good enough to pull together the PC market share rankings and puts forth a cogent explanation of several possible outcomes, including — believe it or not — a potential hindrance to the Foxconn manufacturing tank.

Interestingly, while many pundits don’t believe the Taiwanese ODMs have the financial girth to absorb HP’s market-leading PC unit, one of the emerging possibilities would be Samsung, whose incentive to snatch it up would go (far) beyond box sales. Indeed, as TrendForce points out, Samsung could leverage the PC chain to create additional sales for its components and batteries. Samsung is flush with cash — more than $55 billion on its balance sheet, of which $20 billion is in cash or equivalents. (The head of HP’s PC unit says it is worth more than $10 billion.) It could handle the financial strain of taking on HP’s PC arm, even though revenue runs in the tens of billions per quarter and its operating profit has grown seven of the past eight quarters.

If an outside suitor doesn’t materialize, HP has a successful track record of spinning off businesses, with Agilent being the most prominent. If that happens, the supply chain status quo might be maintained.

Something to think about.

 

 

Tablet ‘Victory’ Not an Easy Call

“Will Tablets Kill the PC Star?”

That’s the provocative headline of this piece in Barron’s today, which discusses a recent Citigroup report asserting that hidden inside the otherwise overwhelming volume of PC shipments (400 million next year) is the makings of an ugly trend: tablet computer shipments (35 million next year) eliminate one PC for every 2.5 tablets sold.

That would translate into eliminate about 11 million lost PC sales next year, the analysts say.

What is not commented on — but should be — is the effect of smartphones on both markets. Smartphones currently outsell by more than tablets 4 to 1, and that market is growing much faster than those for tablets or PCs, for good reason. The 4G phones are fast — faster than broadband, in my experience — and obviously highly portable. Given that anyone under the age of 30 seems to have innate texting skills, not to mention a preference for that medium, the advantage of the standard (read: larger) PC keyboard is somewhat neutralized. Cost? Advantage smartphone.

If anything, I think this suggests the vast potential of cloud computing is very real. Users could, as needed, simply plug in their phones to dummy terminals: storage and applications software would reside elsewhere.

Unfortunately, except for a relative handful of players, no matter which way the end-market shifts most EMS companies will be left in the cold. These are very-high volume arenas in which few have the capacity to play.

Flextronics Showing PC Muscle

How can you not like what Flextronics is doing in the computing space right now?

The world’s second-largest EMS player just opened its fourth end-to-end computing campus in China, a one million sq. ft. behemoth that offers complete design and manufacturing services for desktop, computers, notebook products and tablets.

More significant, the move underscores that Flextronics is going right after Foxconn. Unlike some competitors that have chosen to cede entire industries to Foxconn, Flextronics is turning that approach on its head.

While most analysts see computing as a relatively flat industry over the next few years — a prediction that is complicated by the growth of 4G smartphones, which act like de facto PCs — Flextronics has grown its revenue in the segment by taking market share from the very players most saw as the entrenched winners. From practically non-existent a few years ago, Flextronics’ PC segment is expected to nearly double to $2 billion this year and is forecast to hit $4 billion in 2012.

American companies pioneered volume manufacturing. There’s no reason they should not compete in that domain anywhere in the world.