The market for smartphones and tablets is expected to continue its strong growth over the next few years, but most of the sales are expected to shift to emerging markets, including Brazil, Russia, India and China, the so-called “BRIC countries.”
That was the forecast issued Monday by International Data Corp., which is tracking the mega market for “smart connected devices,” which include personal computers, smartphones and tablets.
IDC says the BRIC countries will generate shipments of about 662 million units valued at $206 billion next year while the core of the developed markets — the United States, Japan and the United Kingdom — capture more than 400 million units with a value of $204 billion.
“It is clear that demand for smart connected devices is quickly shifting from developed to emerging markets,” IDC said, adding that shipments to emerging markets are expected to grow at a 17 percent annual compounded rate compared with 7 percent for developed markets.
Most of the growth will come from products that are not personal computers. Of the 1.7 billion unit total market projected for 2014, more than 1.4 billion are expected to be smartphones and tablets, representing a total value of $500 billion. Personal computers, by comparison will see shipments of just over 300 million units with a total value of less than $200 billion.
The forecast illustrates the challenges of established personal computermakers, including Round Rock-based Dell Inc. and Hewlett-Packard Co. Both companies are major sellers of PCs, and both have fumbled attempts to become stronger players in smartphones and tablets.
Both appear to be depending on their long-standing alliances with Microsoft Corp. to build a stronger presence in the still-unproven Windows-based tablet market.
Shareholders in Dell Inc. are scheduled to vote July 18 on a proposed $24.4 billion management takeover of the company led by founder and CEO Michael Dell with Silver Lake Partners, a California investment company. The proposed buyers of the company have said that they will shift the company’s business away from heavy dependence on PC sales and more toward advanced hardware, software and services for enterprise customers. But Dell signalled in late May that the company intends to fight fiercely in the personal computer market as well. PC sales have accounted for most of Dell’s revenue over the years and much of its free cash flow.
“Smartphones and tablets have successfully established a strong presence as the ‘second screen,’” said IDC research analyst Megha Saini, in reference to the other screen that consumers use in addition to the television. The analyst said that trend is being caused by “the transformation in usage patterns, device affordability and, most of all, the comfort of a mobile and digital lifestyle.
“Vendors and (device makers) need to be aware of the different usage patterns so as to drive product innovation that suits the tangible needs of their digital consumers.”
The rise of smartphone and tablet shipments has been accompanied by falling prices. Average selling prices for tablets dropped 19 percent between 2011 and 2012 down to $426 per unit. Smartphone prices dropped 8.2 percent over the same time period to $407.
The move into emerging markets is accelerating the drop in selling prices. IDC expects that “sub-$300” smartphones and “sub-$350 tablets” will drive the bulk of new shipments in 2014 and beyond. Developed markets will continue to favor higher-priced devices, with smart and tablet prices expected to average $490 and $370, respectively next year.
“Smartphone and tablet prices are now less prohibitive to first-time buyers in emerging markets,” said Bob O’Donnell, an IDC vice president. The analyst said burgeoning sales to emerging markets are a “mouth-watering prospect” for device makers, but he cautioned that “vendors will face huge struggles to meet the demands profitably… This price war is a race to the bottom and it’s not at all clear that this low-end market offers sustainable profits to smartphone and tablet vendors.”
Projected growth of connected devices
Category 2012 units 2017 estimated units Estimated annualized
(in millions) (in millions) growth rate
Desktop PCs 148.2 123.8 -3.5%
Portable PCs 200.9 209.5 0.8%
Tablets 144.4 410.3 23.2%
Smartphones 722.4 1,578.7 16.9%