Collectively, 2.5 billion devices are expected to ship in 2014.
Phones will make up 1.9 billion of that pie, a 4.9% increase on last year. Growth in phones is projected to come from mid tier devices.
Worldwide shipments of traditional PCs are forecast to total 276.7 million units in 2014, a 6.6% decline on 2013.
The improved overall devices growth rate vs last year is down to a couple of factors, says Gartner analyst Ranjit Atwal: on the one hand, a softening of the decline in PC sales, and on the other continued adoption of mobile phones in emerging markets as handset prices are squeezed lower to allow more of us meatsacks to shuffle up the onramp and upgrade from basic phones to budget smartphones.
“The PC market as a whole is declining less, so it’s not such a drag on the overall growth,” Atwal told media website TechCrunch. ”And then on the phone side there’s still an upgrade path in emerging markets — we’ll see lower price points come through. There’s still that shift of people in emerging markets, although that will be a lower price point, so there’s a unit uptick but impact on revenues.”
Why are PCs declining less than they were? It’s something of a bottoming out of the flight from traditional desktops to other types of devices (like tablets).
“The decline in PCs is starting to bottom out as users have disposed of PCs that they don’t want to use, so on the PC side we’re getting to what we might call more of an engaged user-installed base,” said Atwal.
He added that the past 18 months to two years in the space have seen users experimenting with new device types and use-cases being pushed by manufacturers, but he argues that some of that experimentation is shaking out now, as people get more comfortable about the devices they feel are genuinely useful to them.
So maybe they flirted with a tablet for work but decided that actually a laptop is better suited to their needs.
“What we’ve seen [in the past 18 months to two years] is users buying different devices and then getting rid of different devices — so they’ve been mixing and matching different devices as they come onto the market,” said Atwal. “Now some of that is shaking down in that users are getting a bigger handle on how they’re actually deploying or using those different types of devices. And effectively deciding over time… which of those devices are important for which things.”
“The next phase is people will continue to buy devices, but will start to rationalise or increase their portfolio of devices, as well, and try to work out what really fits their need,” he added.
That said, there’s more user head-scratching to be done when it comes to laptop/tablet hybrids. ”We’re going through another phase of users understanding whether these hybrids coming in — combinations of tablets and keyboards — really is what they want, rather than dedicated devices,” he said.
Gartner’s forecast pegs tablet growth at 38.6% in 2014, as it says adoption of slates will continue into markets other than North America.
Although tablet growth is slowing somewhat that’s to be expected, says Atwal, since the category has been such a powerhouse of growth in recent years.
“It’s what you would expect. Tablet growth has been substantial, especially in North America, so as you go through the phases it’s going to slow,” he said. “But it’s still over 30% so, relatively, it is not huge growth but 30% growth in any market is still substantial… So I would be very wary of calling tablet growth slowing down.
“Over time there’s a shift from iOS… to now lower priced Android tablets which is the next phase in terms of how people adopt. Because they’re going to be lower priced, it’s not the early adopters, it’s the next level. This is the evolution of the market.”
Device makers are facing squeezed margins across the board, said Atwal, adding: “There is no respect, as far as that is concerned, for the vendors.”
Google, with Android and its services-focused “post-hardware play” continues to be the main beneficiary of a market where hardware margins continue to be driven down — being as it leads to device adoption swelling. Gartner says Android is still on pace to sell more than one billion devices in 2014.
“Android seems to be a neverending story in terms of a devices installed base,” said Atwal, pointing to the rise of the OS in categories outside of the ones covered by this report, such as wearables or smart TVs.
“We’re starting to see even notebooks and desktops with Android in… and then at the other end they’ve got TVs and smart TVs, and cars,” he said. “Once you’ve got that installed base, can the hardware vendors do anything? It’s more of an application story after that.”
What happens to hardware vendors in a market with shrinking profits is usually consolidation and exits. Witness the PC market.
Portfolio mix is they key to which manufacturers will survive in the devices space and which won’t, said Atwal. “They have to make choices between Android and Microsoft and then ultimately to try and devise further services on top of that. And that’s always been an issue. While we have a lot more range of devices, essentially the business model underneath it still needs to evolve much more rapidly than it has.
“Even though the market’s growing… they haven’t really managed to push any upside into the margin.”
Turning to Apple, Gartner notes that iOS tablet growth slowed in North America in 2013 and the analyst said Cupertino will need to “reinvigorate” its replacement cycle to help fire up iPad growth.
Talking generally about Apple’s prospects, Atwal said there is still the option for the company to do something disruptive at the lower end of mobile devices — albeit, doing budget hardware isn’t the Apple way.
There is also still an opportunity for Apple to offer something with more mainstream appeal in wearables — i.e. more mainstream than a lot of the “me too” devices currently on the market, which tend to target specific niches such as fitness.
“It will be interesting to see if they do produce something different,” he added, noting that wearables require a new approach to interface too — driven by gestures, or potentially voice.
“That’s a way that [Apple] may be looking at doing something different. They’ve tried voice [with Siri], and whether that gets enhanced to be usable, becomes a really kind of effortless gesture for different interactions with devices. That’s the next era in terms of how we might move forward.”