Before we go ahead, let us take a look at the computer industry today, and why it finds itself in the doldrums. Technology is reaching its saturation points for many in the developed markets. Take sales of personal computers, for example. They are likely to grow an anemic 1% this year. Wrote John Markoff in an article recently in the New York Times (September 30, 2002):
For decades, [the personal computer industry] has relied on the certainty that customers have an unquenchable desire for speedier new machines. But computers have reached a point where for the most common home purposes Web surfing, e-mail and word processing they are already more than fast enough to suit a typical home user’s needs.
Amid the prolonged general economic downturn, sales of PC’s in the United States show no signs of reviving soon. Gartner estimates that the industry’s sales shrank last year by almost 5 percent after growing by 10 percent to 27 percent annually since 1990. This year promises to be just as bleak.
Nevertheless, Gartner analysts estimate that one billion personal computers will be sold in the next six years. At the same time, the market researchers acknowledge that their projected 9 percent annual growth rate will in the future be largely based on continued expansion of sales in the developing world.
Paul Otellini, Intel’s president and chief operating officer acknowledged that most of the incremental growth in the personal computer market since 2000 is already coming from what he calls “emerging markets” developing countries where there are now few computers.
“We believe that 50 percent of all the incremental units sold in the next five years will come from these markets,” he said. There are now about 500 million personal computers in the world, he said, and with the help of the emerging markets the industry, over a long period, could still expect to see double-digit growth outside the industrial world.
Taking together Gartners projection of a billion PC sales in the next six years and Otellinis estimate that half of all the next sales will come from the worlds emerging markets, this means that emerging markets will buy 500 million new computers in the next 6 years. This will happen for sure, but the question is will these computers have the latest Intel CPUs and Microsoft software each costing hundreds of dollars?
Emerging markets do not need 2 Ghz desktop computers. (I also believe with they do not need the small-footprint hand-held computers which are good for concept demonstrations but impractical for full-fledged daily use.) They need lower-priced, good-enough computers. And in the computer industry, it is not only difficult to buy lower-priced computers but also well nigh impossible to buy older software which can run on those machines. This is the strategy used very effectively by Intel and Microsoft. It has served them well in the developed markets, but it will not help them in computings next markets.
Tomorrow: Wave Theory
Technologys Next Markets T