Markets, Maturity, and Smartphones

I couldn’t get any farther than the caption of James Joyner’s recent post at Outside the Beltway, “Have Smart Phones Gone the Way of the PC?”, without responding.

What does “the way of the PC” mean? In 2017 more than 262 million PCs were sold worldwide. That’s down from number of units sold way back in the heyday of PCs back in 2011 but it’s far from dead. I wouldn’t mind having .1% of that market.

To understand what’s going on let’s start with mainframes—those big dinosaurs of computers that were just about all that were sold in 1970. In 1970 IBM sold about $17 billion worth of mainframes; last year they sold about $2 billion worth. That sounds pretty bad until you realize that it was predicted that the last mainframe would be turned off for good in 1999, 19 years ago. I haven’t been able to discover the unit sales of mainframes. Clearly, there’s been an enormous drop-off but they ain’t dead yet. What’s actually happened is that the market for mainframes is mature, the number of prospective customers for mainframes has declined, and mainframe sales now follow the development and replacement cycle for mainframes.

A mature market is one in which all of the prospects for a product already has as many as they need. When that happens customers just replace the products they have when the old ones wear out or it’s more economical to replace the old model than to keep it.

In mainframe computers there’s a long development cycle and a long replacement cycle. They’re pretty durable and maintainable and people tend to keep them for as long as they can, for many years.

Now let’s turn to PCs. In 2011 the total market for PCs was 350 some-odd million and now it’s around 262 some-odd. The performance of the PC you bought in 2015 isn’t much different from the one you’d buy now so there’s no pressing reason to replace your existing PC. Sales of PCs have just about leveled off. I believe that the PC space has become a mature market.

It won’t disappear. Just as there are darned good reasons for some companies to keep using mainframes, there are things you just can’t do particularly well using your smartphone or a tablet. Will that change? It might but I believe there will be a substantial niche for personal computers, desktops and notebooks, for the foreseeable future.

What about the smartphone? I think it’s almost undoubtedly true that smartphones, too, have become a mature market. Increases in sales will depend on increases in the population and the development and replacement cycles.

Weirdly, the U. S. is sort of a backwater for smartphones for regulatory reasons and there may be some life in the U. S. market for smartphones yet. It depends on what our Lords and Masters see fit to let us have.