A zero-sum game
Even in the best years, worldwide consumer electronics spending is often a slow, single-digit growth industry. Last year, consumers allocated fewer dollars towards electronic purchases while shifting more of their remaining dollars towards smartphones and tablets. However, this softness hasn’t stopped the smartphone and tablet market, which is expected to account for 40% of worldwide consumer electronic spending in 2013. In terms of an addressable market, tablets and smartphones will represent a $400 billion opportunity in 2013, whereas the PC laptop market will represent a $92 billion opportunity worldwide. In other words, the smartphone and tablet industries have a far greater reach than the PC market could ever imagine.
The sort-of-silver lining
Although aggregate consumer electronic spending is for the most part a zero-sum game, the total number of Internet-connected devices continues to climb. According to NPD, U.S. households now own a combined 500 million Internet-connected devices, which breaks down to an average of 5.7 per household. This average represents a 0.4% increase from three months ago, largely driven by robust demand for smartphones and tablets. Companies like Google Inc (NASDAQ:GOOG) are in an excellent position to benefit greatly from increased internet usage, but the rest of the story isn’t as clear.
In emerging markets, where smartphones tend to be unsubsidized, adoption rates are largely correlated to the average selling price of devices. It’s expected that the smartphone will play a central role in how the majority of the next 2 billion Internet users will experience the Internet for the first time. The prospect of the $100 smartphone will act as a great enabler to increase adoption rates across the world. In this context, it’s highly probable these users weren’t in the market for a PC in the first place.
Affordable prices coupled with less overall saturation are great reasons why tablets and smartphones will continue to be adopted at a higher rate than PCs, but will it be enough to prolong the PC replacement cycle? At this time, it’s still too early to say, especially since the PC market is poised to evolve in the coming years.
The article Will Falling Smartphone and Tablet Prices Hurt the PC? originally appeared on Fool.com and is written by Steve Heller.
Fool contributor Steve Heller owns shares of Apple, Qualcomm, and Google. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Qualcomm.
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