By Patrick Avenell
Constant innovation in the notebook PC category will prevent price erosion and value decline, ensuring this segment does not replicate the catastrophe that has beset flat panel TVs over the last decade, according to Intel Australia and New Zealand GM Kate Burleigh.
Although GfK Australia and New Zealand reported average sales price growth for the first quarter of 2012 — up over $100 — managing director Gary Lamb told Current.com.au that he sees similarities between the notebook PC category and the flat panel market, which has been experiencing unprecedented price erosion and margin decay.
“There’s strong growth in connected devices, such as smartphones, tablets, notebook PCs, and, more recently, IPTVs,” Lamb said, when asked about his view on the first half of 2012.
“My biggest hope is that we don’t witness a repeat of what happened to the TV category in Notebooks but, unfortunately, many of the signs are already there.”
When asked if Intel was concerned about the PC industry mirroring the TV category, Burleigh was bullish in her rejection of this.
“I’m not overly concerned at the moment — we’re still seeing great sales in traditional laptops and also Ultrabooks here in Australia and over in New Zealand,” she said at the launch of Intel’s 3rd Generation (Ivy Bridge) processors.
“We’ve been in a situation of double digit growth for many years now and I have to pinch myself when I see the masses of volumes of laptops that we continue to sell in these markets.”
Volume selling was the strategy TV suppliers and retailers used to originally create huge revenues in the flat panel category. During 2007, GfK reported that combined LCD and plasma unit sales totalled 969,198, while total value was just over $2 billion, for a crude average sales price of $2,079.
In 2011, GfK reported that 3,541,326 units of plasma, LCD and LED TVs had been sold, more than 3.5 times the amount sold in 2007. The total value of these sales was $3.3 billion — only 1.6 times 2007 revenue — as average sales prices collapsed to just under $950. [Please see below for information on these figures.]
Burleigh stressed that the reason she was not worried for the PC category was because of constant innovation, such as the original upgrade from 1st Generation processors (Nehalum) to 2nd Generation (Sandy Bridge), then the launch of Ultrabooks, and now the launch of 3rd Generation (Ivy Bridge) Ultrabooks.
“This is what we’re doing — we’re innovating,” she said. “3rd Generation brings new customers into the store — it gives them a reason to upgrade that 3-year-old PC.
“Ultrabook is a new platform — it encourages people to think, ‘Maybe it’s about time I upgraded that old PC and get something that’s new and stylish’.
“If you don’t innovate, you’re not going to go anywhere, but Intel is innovating like mad and for that reason I am very confident that we will continue to do well with our sales.”
As is self evident in the above statistics, the TV category was innovating during its period of margin decline: LED backlit LCD TVs were introduced, Full HD 1080p became more widespread, 3D was released and IPTVs came on the market.
Gary Lamb is something of a svengali on this topic. Two years ago at a retailer conference in Croatia, he highlighted the unsustainable position in flat panel TVs, precisely predicting the impending doom.
“The TV market over the last few months has become a lot tougher. Volumes in TV are forging ahead, but the prices are in freefall,” Lamb told delegates. “Even if volumes remain at current levels, the value of the market has already begun to decline.”
Having been proved spot on, it should be worrying for Intel and PC manufacturers that Lamb has already seen similar signs in their industry.
The 2007 TV statistics: plasma is 12 months to August 2007. LCD is 12 months to February 2007.
The 2011 TV statistics: plasma is 12 months to August 2011. LCD is 12 months to March 2011. LED is 12 months to February 2011.