Credit: Visual China
BEIJING, December 19 (TMTPOST) -- The year 2023 may be a turning point for the PC industry. According to research firm Canalys, the global smartphone market is expected to see a 5% decline in shipments in 2023 and the global PC market will ship 249 million units for the year, down 12.4% year-on-year. Traditional PCs are experiencing a dark moment in the post-pandemic era.
However, due to the emergence of Arm chips and the new wave of artificial intelligence led by ChatGPT, a new generation of laptops utilizing mobile architecture and AI-based PCs have emerged.
These two forces might not only help the PC industry navigate its current rapids but also pave the way for its future development.
Firstly, the rise of Arm chips is altering the traditional landscape of the PC industry. Due to their high efficiency and low power consumption, Arm chips have been widely used in smartphones, tablets, and other areas. In the PC realm, with the introduction of Arm-based laptops such as Microsoft's Surface series, more consumers are recognizing the value of Arm chips. These laptops not only possess longer battery life but also deliver performance sufficient for most daily tasks. Hence, the application of Arm chips could become a potent weapon for the PC industry to overcome its current challenges.
Secondly, the rise of AI technologies like ChatGPT has brought new opportunities for the PC industry. The "AI PC", as a new type of PC product, is characterized by its integration of AI technology. Through algorithms like deep learning and natural language processing, AI PC can autonomously handle complex tasks such as speech and image recognition. This automated processing not only enhances work efficiency but also offers consumers more convenient services. Consequently, AI PC can not only meet the needs of certain professional fields but also potentially become a significant growth point in the future PC market.
Late Responses to the Ongoing Changes
According to Gartner's report, global PC manufacturers shipped 64.3 million units in the third quarter of the year, marking a 9% year-on-year decline. The PC market has witnessed a continuous decline for eight consecutive quarters.
The same is true for the Chinese market. The personal computer shipments in mainland China in the second quarter of 2023 fell by 19% year-on-year to 9.6 million units, according to Canalys’s report. An notable change is Dell's loss in its established market share.
Canalys data shows that Dell suffered 52% year-on-year decline, the largest among top manufacturers and ranked fourth in market share, surpassed by HP and Huawei.
As early as January this year, Nikkei Asian reported Dell's plans to cease using chips manufactured in China by 2024, including those made by non-Chinese chip manufacturers in factories in China. In March, there were rumors of Dell setting a timetable to move production capacity out of mainland China: 50% by 2025 and complete detachment from the Chinese supply chain by 2027, transitioning to 100% non-Chinese manufacturing.
Dell had not officially responded to these claims for a long time. It wasn't until November 24 of this year, during Dell's 25th anniversary celebration in the Chinese market, that they addressed these rumors. Dell's Global Senior Vice President, Wu Dongmei, said that Dell had never made any such statements or comments. No comments on rumors is the company’s global code of conduct and its consistent stance. Unfortunately, this approach has been misinterpreted as confirmation of those rumors.
Feng Liang, who has worked at Dell for many years, told TMTPost that Dell Computer, headquartered in Austin, Texas, the United States, has a conservative corporate culture and has always had a tradition of "less talk, more action." Dell is also currently transforming to artificial intelligence and enterprise digitization.
However, Dell's financial performance doesn't align with expectations. Its Q3 revenue dropped by 10% year-on-year to $22.251 billion. Dell's PC client solutions business, encompassing sales for both enterprise and consumer PCs, saw an 11% year-on-year decline to $12.276 billion, which was also a 5% month-on-month decline, falling short of analysts' general expectations.
While some are concerned, others rejoice: Huawei stands as the biggest beneficiary in this reshuffling of the PC market.
In the second quarter of 2023, Huawei held a 9% share of the Chinese PC market, just behind Lenovo and HP. Although their quarterly growth rate was only 6%, it is commendable for a newcomer in the PC market to achieve growth amidst an overall decline.
In comparison to traditional PCs, Huawei, based on distributed technology, integrates the Windows PC with the smartphone ecosystem. Lu Liang, a Huawei laptop consumer, told TMTPost, "I chose a Huawei laptop mainly because I use a Huawei smartphone, making it more convenient for operations such as transferring photos."
Additionally, according to Bloomberg, China plans to replace 50 million computers in various government agencies and administrative departments within two years with domestically produced units. This undoubtedly serves as good news for enterprises pushing for domestic production.
Chip Giants Flock to Arm Architecture
Apart from market changes, the PC industry has seen some technological shifts that might change people's work habits in the long run.
Compared to traditional x86 architecture-based PCs, PCs based on Arm architecture are cost-effective, energy-efficient, and capable of meeting daily needs. They have been validated by Apple's M-series chips, capable of handling high workloads, presenting an ideal PC architecture for the future. EO Intelligence data reveals that the global market share of Arm architecture-based PCs has risen from 1.4% in 2020 to 12.8% in 2022, showing significant growth.
On October 25, 2023, Qualcomm officially launched the Snapdragon X Elite, a brand-new processor designed for PCs during the Snapdragon Summit. The chip employs a 4nm manufacturing process, with 12 large Oryon CPU cores at 3.8GHz. It integrates Qualcomm's Adreno GPU and Hexagon NPU. According to Qualcomm's data, compared to Intel's 12-core i7-1360P and 10-core i7-1355U processors, the Snapdragon X Elite improves CPU performance by two times while reducing power consumption by 68%.
Reports suggest that apart from Qualcomm, more chip companies are entering the arena. According to Reuters, NVIDIA is developing chips using Arm technology and has begun designing CPUs for personal computers that will run the Windows operating system. There are also indications that AMD plans to produce CPUs based on Arm architecture, expected to hit the PC chip market as early as 2025.
While Arm architecture is just getting started in the software ecosystem, it exhibits better versatility. With development tools similar to those used in smartphones, Arm architecture has an edge in breaking down barriers between PCs and smartphones in the growing trend of cross-device applications. EO Intelligence estimates that by 2027, Arm's share in the PC market (excluding tablets) will reach 26.7%.
Is AI PC the Future Mainstream?
Aside from the ongoing and upcoming Arm architecture-based PCs, the AI PC is also the latest and hottest concept of 2023. Recent developments indicate that AI PCs can perform functions such as image magnification, generating visuals from text, code writing, video editing, and more.
In October of this year, Intel announced the first "AI PC Acceleration Program," followed by Lenovo showcasing the world's first AI PC at the end of the month. Compared to traditional PCs, AI PCs can create personalized local knowledge bases, run individual large models using model compression technology, and achieve natural interaction between users and AI. Apart from Lenovo, Acer, HP, ASUS ROG, Dell, Mechrevo, and MSI are all set to release AI PC products featuring Intel's latest generation Core Ultra series processors.
According to Canalys, AI-compatible personal computers are expected to rapidly gain popularity from 2025 and are poised to comprise around 60% of all PC shipments by 2027. Manufacturers and channel partners seizing this opportunity will benefit from the higher selling price of AI personal computers and have the chance to offer services and solutions beyond hardware.
However, at present, AI PCs seem to lack certainty regarding user demand and immediate problem solution. The AI currently lacks irreplaceability, making it difficult for AI PCs to surpass traditional PCs in user experience. Despite the potential for deploying large models on the device side brought by AI PCs, constrained by computing power and hardware scale, they still struggle to compete in achieving application effects compared to PC products with more robust general-purpose computing power or access to cloud computing power.
Regarding the development of artificial intelligence, each company's large models are still in the foundational stage. On October 31, Cameron Jones and Benjamin Bergen, two researchers from the University of California, San Diego, released their empirical research results of Turing test on AI intelligent agents like GPT-4. The experiment, conducted with the help of 652 human participants, tested GPT-4's ability to imitate humans and found that the best-performing setting achieved a success rate of 41%, while the human level was at 63%. Therefore, the authors believe that GPT-4 did not pass the Turing test.
Nevertheless, for PC companies, the allure or imaginative potential that AI offers has become a reasonable means of self-rescue in the current winter of the consumer electronics industry.
According to Lenovo's Q2 financial report of 2023, the sustained effectiveness of diversified growth engines has seen non-PC business revenue accounting for 41%, a year-on-year increase of 4.3 percentage points. Products optimized with AI, including AI PCs, AI smartphones, AI servers, and AI storage, are driving Lenovo's revenue and profit growth. Its Chairman and CEO, Yang Yuanqing, said that Lenovo's current target is to have non-PC business exceed 50% within two years.
Considering the cyclical nature of the PC market, the anticipation of a surge in AI PC upgrades at the onset of the epidemic seems to be reasonable. IDC forecasts that the Chinese PC market will maintain a steady growth trend in the next five years due to the arrival of AI PCs. The overall market size of desktops, laptops, and tablets will increase from 68 million units in 2023 to over 80 million units in 2027, a nearly 18% increase.
(This article was first published on the TMTPost. Reporting by Wu Honglei and editing by Zhong Yi.)