What will happen to the PC market in the coming years? Global trends and Russian specifics

Edition: IT Channel News
Date: May 14, 2024

Nikolai Pulich, Director of Merlion's Broadline Procurement Department

Analysts are predicting a planned replacement, modernization, and significant update to the computer fleet in the near future.

Light at the end of the tunnel

According to leading analytical agencies, the global PC market has experienced an unprecedented "double-digit" decline in the past two years.  There is some optimism in the global PC market after a period of decline, with the fourth quarter of 2023 showing a slight improvement.  Analysts are heralding 2024 as a year of growth for the PC market, with the first quarter of 2024 exceeding expectations by 1.5-3%, according to different researchers.

Analysts have identified three factors driving this growth, two of which are familiar and one considered "new."

"The most common reasons for replacing computers are the need to upgrade outdated PCs and to switch to a new operating system like Windows 11.  These are the two most popular reasons for replacement you will hear.  The first one is always applicable, and the second becomes relevant after the new version of the Microsoft operating system is released.

While it's always a good idea to replace obsolete computers, I'm not convinced that computers purchased at the beginning of the pandemic are so outdated that they need to be replaced on a large scale.

The situation for Windows 11 is not entirely clear.  The new operating system is still experiencing some issues, and it will take time to work out all the bugs.  I anticipate that significant upgrades and replacements will likely start around the fall of 2025 when support for Windows 10 ends, but this timeline is also uncertain.

One processor is good, but it is better with AI,  although more expensive.

The third driver, as already mentioned, is "new".  This is an increase in the share of "AI-capable PCs," that is, PCs with artificial intelligence support.

While IDC and Gartner analysts are forecasting a rise in sales of AI-enabled computers, Canalys is already providing detailed projections of their global penetration.  According to their forecast, this year, sales of computers with AI chips will account for 19% (in terms of units, slightly higher in terms of revenue), and this figure is expected to increase to 37% by 2025, 53% by 2026, and 60% by 2027. By 2030, all computers are projected to be "AI-capable."

Canalys also asserts that the price increase for AI-enabled computers will be relatively minor.  In the short term, analysts predict that PCs with a neuroprocessor will be priced 10-15% higher than those without an NPU.

Price Issues

There is some craftiness in this assertion.  An AI computer is not just a "regular computer with a built-in AI chip." It requires significantly more RAM, preferably fast LPPDDR5t or LPPDDR5x, to work effectively with AI models.

But how much more? In the future, Microsoft's "Windows with AI" is estimated to require 16 GB of RAM, a significant increase compared to the 1 GB needed by Windows 10 and the 4 GB required by Windows 11.  Additionally, for optimal performance, a conservative estimate suggests that 32 GB of RAM would be necessary to support AI solutions.

In addition to increased RAM, devices running AI programs will require ample disk space.  For those planning to use cloud resources, faster communication speeds will be essential.  Laptops will also require larger batteries to accommodate the demands of AI technology.  Moreover, a sound graphics card will be crucial for these devices.

As a result, the average AI computer will involuntarily have its top component, the neurochip, which adds very little to its price, but all the other elements will cost a lot.

A sharp increase in demand for memory chips and high-capacity drives can lead to shortages and rising prices, which will also affect "ordinary" PCs.  Even if the earthquake in Taiwan, which occurred in early April 2024, did not significantly affect the semiconductor industry, as local manufacturers claim.

It's important to note that the three announced drivers are not entirely independent.  For instance, it's unclear why one would switch to Windows 11 if a switch to "Windows AI" is imminent.  Consequently, is it worthwhile to invest in a computer designed for Windows 11 if it will soon be updated with entirely different features for AI capabilities?

On the other hand, it's also plausible that it might be prudent to purchase a new "old-style" computer at the current "old" prices before vendors make AI mandatory for every workplace.

And what about Russia?

The obsolescence of computers due to the pandemic affected everyone, including us.  Although the PC market slowly grew rather than dramatically falling, the issue of replacement due to obsolescence is still relevant.

Additionally, as regards the potential obsolescence of Windows 10, Microsoft products are becoming less relevant for Russia.  We would sometimes be happy to keep them — but alas, this company is doing everything to ensure that we switch to alternative solutions.  It's possible that many, especially in the corporate segment, will transition to various versions of Linux as Windows 10 becomes obsolete.  The pace of this transition will likely depend more on the initiatives of Linux developers, especially those in Russia, than on Microsoft.

The upcoming AI boom will undoubtedly impact us, mainly due to the rising prices of components.  However, I hope that the general excitement will not sway our companies. They will only implement AI solutions where they are genuinely needed rather than just following trends and analyst recommendations, which seem to suggest implementing AI solutions everywhere.

It's also likely that major local clients will, perhaps reluctantly, decrease their reliance on well-known brands (especially those at the forefront of PC manufacturing with AI) and will instead focus more on local assembly and suppliers from friendly countries.

Source: https://www.novostiitkanala.ru/news/detail.php?ID=176895