There are different segments within the commercial PC sector. In Hong Kong, for example, most commercial PCs are used for normal office applications. These commercial buyers and users do not need to chase the technology. They do not need the very latest CPUs and system architecture, and for them that lowers the TCO.
     While TCO and lifespan can be major factors in decision making, that’s not to say that all companies will pay detailed attention to the TCO. Usually, it’s the large corporates, such as banks, who put the emphasis on TCO. Small businesses seldom talk about TCO.
     Large companies will also attach a lot of importance to security and will try to see that their systems are virus-free. Smaller companies may be more complacent, and if the antivirus software expires, for example, they may not bother to update it.

A Mac is now a PC
CH: Apple has managed to increase its global computer market share to around 8%. Do you see a revival of interest in Mac computers, and if so, how does the price-performance equation look, now, bearing in mind that Macs have traditionally been seen as pricey if not over-priced?

KS: Apple switched from IBM’s PowerPC to Intel chips in the first quarter of 2006. The net result is that there’s now no difference, essentially, between a Mac and a PC, except of course that Macs come bundled with OS X. Even so, Leopard, the latest version of the Mac OS, makes it possible to dual boot the machine and have Windows as an option.
     It seems as though Mac users are attracted by the good looks of Apple products, the “Apple look,” but also by the battery life, in the case of Apple notebooks. Apparently end users think the battery life of these machines is quite good.
     In the past, people hesitated to buy a Mac because there was little or no compatibility with Windows applications. With Leopard, you can install Windows applications, and there are no more compatibility issues. This could be a deciding factor for some end users, who may have been worried that if they bring a file home from work, for example, they wouldn’t be able to run it on their Mac.
     In the Asia Pacific excluding Japan (APEJ), we have definitely seen growth in the market share of Macs. In APEJ, Macs saw 10% sequential quarterly growth, for the first three quarters of 2007. In APEJ, Apple’s market share increased to 0.8% in the first three quarters of 2007, from 0.6% in 2006. We expect that Apple will be able to accelerate growth this year. Apple will be opening centers in China, for example.

UMPCs see low demand
CH: We’ve also seen, recently, a number of product offerings in a segment often called UMPC (Ultra Mobile PC) or simply portable PC. Is there genuine demand for this type of machine, or something similar, such as mini-notebooks? If so, what levels of performance, at what price points, are we likely to see in 2008?

KS: UMPCs were launched in the region (APEJ) in early 2006, but demand has been low. In 2006, shipments totaled around 38,000, for 0.3% of the total notebook market. We believe that a relatively short battery life, combined with a high selling price for this form factor, is the reason for low demand.

     Mini notebooks offer better performance than UMPCs, but if end users only need this type of machine for updating their address books and so on, then they will probably choose a PDA instead.
     Between January and September, last year, in the APEJ region, shipments of UMPCs rose to 49,000 units, but that figure only represents about 0.4% of the total notebook market.
     With continued growth in the notebook market we have seen the appearance of “mini” models, such as Fujitsu’s Lifebook U1010, that are genuinely different in their design. But the price of this machine is still high, and its hard drive capacity is only 40GB, of which 10GB are taken up by the Vista OS. We doubt whether the market “fever” for this type of machine will be sustained this year. We are not so optimistic about the future of the UMPC, and perhaps they will quietly be withdrawn from the market.

CH: Notebook PCs come in all shapes and sizes, of course. What will be the key factors driving demand for notebooks in 2008, and how will they shake out in terms of pricing and performance?

KS: Notebook PCs, in 2008, will see strong growth in the APEJ region, in all market segments. Generally, we’ve seen PC vendors switch their focus from desktop machines to notebooks and introduce a range of high performance machines. The strategy of the vendors has been to try to combine high performance with low pricing.
     In the third quarter of 2007 our data showed that growth in the notebook sector was at 44% in the APEJ region in 2006, based on a comparison with sales in 2005. Our data also indicates that between January and September, last year, the notebook sector grew at 51%, compared with the same period in 2006. Our expectation is that in 2007 as a whole, the APEJ region would see 52% overall growth for notebook PCs. Our data indicates that overall, the notebook sector grew at 44%, in the region, in 2006, as compared with 2005. You can see that there has been significant acceleration in the rate of growth.
     We believe that growth is being driven by several factors, including the strategy of offering high specifications and performance at relatively low pricing. Then some vendors are offering special prices for students. We also think that wireless connectivity combined with the mobility of the notebook is a strong selling point.

Displays to see upgrade cycle
CH: Among peripheral devices, the display stands out as an important item that has to be figured into the pricing equation. How will the display question pan out in 2008, and what will be the performance and pricing options? I always assume there is downward pressure on the price of an LCD monitor. How do you see pricing trends for LCD monitors? Are we likely to see any significant movement in 2008?

KS: LCD monitor adoption is quite high in the region, and in many countries in the APEJ, such as Taiwan, the LCD adoption rate is already at more than 90%. In 2008, we think it’s likely that growth will be driven primarily by an upgrade cycle in a number of Asian countries, although in some countries in the region, such as the Philippines and Indonesia, the adoption rate is still relatively low.
     Pricing will help to motivate an upgrade cycle, and actually the prices of LCD displays have dropped quite a lot. There has been a significant drop in the price of 17-inch LCD monitors, for example.
     A lot of vendors have now introduced wide display LCD monitors, and we can expect to see significant price drops for wide LCD displays also.
     These further price cuts will encourage end users who have not already done so to adopt LCD displays.
     In the meantime, the prices of CRT monitors are remaining quite stable, although here in Hong Kong, shipments are small.
     In 2006, total LCD display shipments in the APEJ stood at 29 million units. In 2007, we can expect that figure to rise to 44 million.
     In terms of form factor, in 2006, the majority of LCD monitors shipped were 17-inch models in a 4:3 aspect ratio. However, 19-inch models saw major growth. In 2006, 17-inch LCD monitors represented 58% of the total market. We think we can expect to see that market share drop to around 40% in 2007, while at the same time 19-inch models will have grown to 42% of the market.