thewindof's Journal

Tapping the bigger market for smart, smaller devices

The PC industry has hit upon its Next Big Thing. Ashlee Vance writes about the remarkable device

Some of the biggest names in personal computing have concocted a rather remarkable device that may take just a couple of years to reach stores.

Able to fit in the palm of your hand, this product can handle the full glory of the Internet, power a two-way video conference and stream high-definition movies to your TV. Instead of solitaire, this tiny product will crunch through the graphics demands of games like “World of Warcraft” and pump out high-quality stereo sound. If so inclined, you could aim the device at a Japanese sign and have it translated on the spot or have your Japanese waiter talk into the computer to help understand your dining options.

Yes, the PC industry has hit upon its Next Big Thing. There’s even a name for it: the smartphone.

For roughly 25 years, PC makers concentrated on building ever-faster desktops and laptops. With the laws of physics, changing user demands and now economics hampering that quest, the PC makers and suppliers have charged into cellphone territory. It’s a natural evolution for companies set on making smaller devices that use less battery power and one that spells serious competition for the entrenched cellphone makers and phone companies.

“The rise of the smartphone and things like graphics and 3-D images weren’t important when the incumbents built this business,” said Michael Rayfield, general manager for mobile business at Nvidia, the PC graphics-chip company. “This is a once-in-a-life-time deal where a huge market changes the things that are important to it.”
The Apple iPhone has already shown how one computer company can shake up an industry. Now other companies would like their chance to do the same.

At the World Mobile Conference in Barcelona last month, Intel announced a deal to supply LG with chips for new mobile devices. Nvidia signed a deal to provide three smartphone makers, which supply mobile phones to brand-name manufacturers and carriers, with its new Tegra processor. Acer, the third-largest PC manufacturer, after Hewlett-Packard and Dell, jumped into the marketplace as well and said it would go from offering no mobiles to 10 new models later this year. Dell has also worked on prototype phones but has not made any commitments to introducing a new product. And Asustek, the company that pioneered the market for ultraportable laptops, or netbooks, has new smartphones coming.

Nokia, the world’s largest mobile phone maker, in turn, said it was considering getting into the PC business. For decades, the PC business boomed as chip manufacturers rushed to one-up one another with faster processors and as computer makers scrambled to squeeze more functions into smaller boxes.

But at a certain point, ever-faster chips become impractical: their blazing speed requires huge amounts of power and cooling. Meanwhile, people have shied away from beefy desktops, opting instead for less-powerful laptops and netbooks that can accomplish everyday tasks just fine like sending e-mail messages, surfing the Internet and dealing with music and movies.

The boring PC

“I think of PCs as just kind of boring these days,” said Linley Gwennap, a longtime chip-industry analyst who is head of the Linley Group. “The action is really with the smartphones, where everyone is competing to cram the most features into a phone.” Computer sales are expected to fall in 2009 for only the second time in the past two decades. But sales of netbooks have surged, convincing the industry it can go one step farther and crack a market where sales are measured in the billions, not millions. “The people pushing the idea of a data-based extension to the desktop will lose,” said Ed Snyder, an analyst with Charter Equity Research. “It has to be a good cellphone first. This is about as far away from PCs as raising elephants.” But the members of the PC clique remain convinced that they can please consumers and carriers at the same time. They’ll provide consumers with a more familiar, richer experience on their devices, they say, which translates into phone upgrades and pricey data plans for the carriers.

The phone market has also been bombarded with operating systems from Microsoft, Google and Intel, creating a growing sense that any company can slap software onto a phone design and burst on the mobile phone scene. This gives existing phone manufacturers like Motorola and Nokia an entirely new set of problems besides falling sales and shrinking margins.