The Smartphone is the New PC. Why is That?

It was going to happen sooner or later anyway, so that fact that it occurred during the last quarter of the first decade of the 21st century adds a nice bow-tie to this trend. According to industry analyst, IDC, smartphones shipments passed the number of PC’s shipped in a quarter. In the fourth quarter of 2010, smart phone manufacturers shipped 100.9 million devices. This was an 87.2 percent increase from a year earlier when 53.9 million units were shipped. At the same time, PC makers shipped 92.1 million units. Although this was still an increase from Q4 of the prior year, it was a fairly anemic 5.5 percent improvement. To read their entire report, click here.

The information goes on to discuss other maneuverings within the smart phone ecosystem such as the market share by manufacturer, but I want to discuss this particular paradigm shift for this blog post. What are some of the reasons that are causing this drift?

I will start off by saying that I am not predicting the death of the PC or laptop computer. They will continue to exist for quite some time and there will always be a need for these devices. However, what I am speculating is that their importance as the center point of a home technology products will continue to wane as smart phones become more adaptive to our needs.

The first thing that would generate this shift would be the accelerated rate at which smart phones are getting “smarter”. Every new generation of phones has a number of enhanced bells and whistles that was lacking on the previous generation model. As an example, taking a look at last year’s release of the iPhone 4 compared to the 3Gs, there were a number of hardware and software changes that were implemented. Features such as retinal display which pack in 4 times more pixels in the same area to dramatically increase resolution to increasing the camera resolution from 3 to 5 megapixels with LED flash. Similarly the Motorola Droid has followed a similar path in features. But this is nothing new, computers and pretty much every other consumer electronic device do the same thing. The difference here is the “apparent” lower cost of ownership. For many users who upgrade their standard cell phones to smart phones, or from one smart phone to a newer generation one, their network provider usually provides some sort of financial incentive. There is usually a combination of lower costs and rebates that accompany a phone purchase by signing onto long term contracts. Though this tethering is a problem for some, many users accept it as a necessary evil and buy into the contract.

As these contracts expire, usually 12 or 24 months down the road the the network operators try to woo their existing customers to lock in for another period of time, the latest phones will be the bait — again at a lower cost than what could be found if buying straight retail. Computers and laptops offer no such incentives and so unless one is a power user, they tend to hold onto to their PCs for some time doing only minor upgrades, if any, to an existing CPU.

The next driver is cost. While component costs for all things electronic has come down, it has really allowed mobile manufacturers to cram more hardware chip sets into their phones than they used to. Most users who would pay $1000 for a PC or laptop will balk at paying even half or a third that price for a smart phone. After all, its a small device that is carried around in a pocket or purse. It’s primary function is to make calls, which is why there are so few iPod Touch competitors in the market. That is where the network providers have stepped in. They understand the immediate price points of consumers. So, they knock down the cost of even a high end smart phone to around $200, and then make up for it by charging larger data fees for the next two years or more. So, to a somewhat cost conscious consumer, shelling out $200 right now for a smart phone that they can pretty much do anything on is well within the financial budgets of most middle class people.

And finally there is the maturing of the services sector. Where it would have been difficult to find good mobile specific services 10, or even 5, years ago, we have come a very long way in being supported by third party providers. The various app stores are an example of that. They take advantage of GPS chips to provide location based services, others are offering augmented reality using smart phone cameras to add layers of information, and still others cough up video and music content across a wide field of genres that are more or less optimized for the telecommunication networks they travel through.

The keyword for smart phones is “immediacy”. Currently, it is the one device that provides that link to almost instant information and communication. Desktop PCs really only provide that when the user is at the PC. Laptops offer more flexibility of location, but are still slower and more cumbersome when taking it out and getting started. The current saturation of social media requires that immediacy to work as well and quickly as it does. Everything from meeting a friend at a restaurant or bar to kick-starting a protest movement like we are seeing in the Middle East takes advantage of reaching anywhere from one person to hundreds of thousands of people in a very short amount of time. There are now search engines that gather and compile data based on the latest trends in news and pop culture that is only minutes old. Where does this information come from? Mostly people tweeting from their smart phones around the world at any given time.

This is the paradigm shift of our time that is driving this change. No longer are computers used just for writing reports, creating spreadsheets, or playing games like it has been for most of the past three decades. The priority has shifted to using consumer technology as a means of communication and information from any coordinate on the planet. The smartphone fills this niche well and it’s not going away. On the contrary, it will continue to grow in importance.

I’d be interested in getting your feedback on this. Let me know what you think.

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