The PC Category Resurgence
Few technology categories have taken more abuse and had opinions formed than the PC category. While the PC is not the primary computing device of billions of people, that crown belongs to the smartphone, it is still the second most adopted category of computing on the planet. The current PC installed base is north of 1.5 billion, with nearly every desk worker in the world using one and almost every household in developed markets owning one.
The PC category had a good run, as prices came down and were designed in, how can I put this nicely, less boring ways. Then around 2014, the category growth fell into steep decline, and it looked like selling between 260-275m PCs a year was the new normal. Then COVID hit, and the PC resurgence happened.
The question today is whether the PC category will fall back to the 2014-2019 levels mostly driven by the same longer replacement cycle we had seen before. If this happens, the category will see steep year-over-year declines. However, I would like to offer a different perspective and a few key reasons I think the PC category can maintain its current momentum.
The meta point here is the COVID years of PC growth will be hard to maintain. In some quarters, the PC saw north of 20% growth, which is remarkable on many levels. The following years will not make significant comparisons, but I think some key things have changed in terms of where the PC category was 2014-2019. So I offer this perspective on why the PC market has a different set of dynamics going for it than it had during its down years.
The PC Installed Base Has Grown
The active number of PCs in use has increased. At one point in time, estimates for active PCs in use were ~1.2 billion, and today that number is ~1.5. This is one of the main factors, in this analysts opinion, why annual PC sales going forward are likely to be higher than the PC drought of 2014-2019. In those years, the base was smaller, and even with predictable refresh cycles of 3-4 years for enterprise and 5-6 years for consumer sales were less than 300m annually, working off an active base of 1.2 billion PCs.
Assuming the same refresh cycles, even though a case can be made in some segments, we will see more frequent refreshes going forward. The sheer growth of the active installed base of PCs means more annual device sales. PC sales in 2020 surpassed 300m units for the first time since 2014, and both 2021 and 2022 look to be stronger than 2020. Keep in mind that those sales estimates still contain the challenge of getting components and demand outstripping supply. Meaning, more PC sales would happen in a perfect world than they actually will for the next few years.
At this point, for the PC category to drop down beneath 300m units, the end user’s relationship with the device would need to change significantly. One critical point that COVID brought out was a renewed relationship with PCs by many. The recognition of dependence for Work or School, the deepened engagement with all the many new features of PCs, and perhaps the reality that PCs have gotten drastically easier to use since they last had a new computer. All these things are leading to a different relationship with PCs today than ever before. During the PC’s downturn, I strongly argued that a critical failure was to make it easy enough for people to get the most out of it. That, in my opinion, is no longer the case, and the breadth of form factors and the evolution of the interface of both Windows and Mac have made for the most user-friendly environment in the category’s history.
COVID’s BUMP and Economic Geographic Independence
A few weeks ago, I came across a column Marc Andreesen wrote called “Technology Saves the World.” This post may be as important, in the big picture, as his “Software Eats the World” column. However, this specific paragraph hits an important point.
“Finally, possibly the most profound technology-driven change of all — geography, and it is bearing on how we live and work. For thousands of years, until the time of COVID, the dominant fact of every productive economy has been that people need to live where we work. The best jobs have always been in the bigger cities, where quality of life is inevitably impaired by the practical constraints of colocation and density. This has also meant that governance of bigger cities can be truly terrible, since people have no choice but to live there if they want the good jobs.
This is, I believe, a permanent civilizational shift. It is perhaps the most important thing that’s happened in my lifetime, a consequence of the internet that’s maybe even more important than the internet. Permanently divorcing physical location from economic opportunity gives us a real shot at radically expanding the number of good jobs in the world while also dramatically improving quality of life for millions, or billions, of people. We may, at long last, shatter the geographic lottery, opening up opportunities to countless people who weren’t lucky enough to be born in the right place.”
The idea that economic opportunity, as a part of the workforce, education, business, entrepreneurship, and more, can now truly be separated from geography is among the most positive technology stories for human flourishing I’ve heard in some time. And, for the arc of this narrative, the PC will play a key role in this permanent civilizational shift Andreesen highlights.
Competition is More Fierce Than Ever
Chief among the points of what makes this environment for the PC different than its down years is competition. Intel has been the unquestioned and dominant leader providing the chips that power PCs for most of the PC’s life. However, today, AMD and now Apple are arguably at the top of their game when creating chips that set new bars for the PC category.
I’d also like to point out that today’s Intel is not the Intel of the last PC downturn. Not only is Intel up against the most competition they have ever had in their history, but they also see a renewed vigor. They are positioning themselves to face their competitors head-on with a new leader in Pat Gelsinger at the helm. A strategy change that will yield more fruitful and predictable product timelines. And an increased effort in manufacturing will benefit Intel’s products and others.
All of this competition is not only healthy but will lead to some of the most impressive products that fit into the PC category than we have seen in a long time.
The result of the factors I mentioned above are the core reasons I feel momentum can be sustained in this category. I firmly believe that new owners of the PC form factor are on the horizon in both commercial and consumer. For example, in an enterprise, it is estimated that between 800 and one billion people do a job every day that requires them to be on their feet most of the time. Most of them use a simple handheld device, but their job can be significantly enhanced by something like an iPad or Windows slate computer. Essentially, these new form factors create opportunities for the PC to go into areas it never could before.