Market Intelligence & Consulting Institute

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1 Market Intelligence & Consulting Institute Intelligencev3289/ Publisher Sample Phone: (US) or or (Int'l) Hours: Monday - Thursday: 5:30am - 6:30pm EST Fridays: 5:30am - 5:30pm EST

2 Development Trends of the Worldwide PC System Industry Market Intelligence & Consulting Institute (MIC) Institute for Information Industry

3 Coverage of PC Systems Desktop Notebook Tablet Convertible NB Detachable Tablet 1

4 Contents Global Market Trends Product Development Trends Highlighted Topics Conclusion 2

5 Global PC System Market Volume, ,000 Thousand Units Growth 100% 500,000 80% 400,000 60% 300,000 40% 200,000 20% 100,000 0% (e) 2016(f) 2017(f) 2018(f) 2019(f) Tablet Vol 242, , , , , ,964 DT Vol 131, , , , , ,374 NB Vol 172, , , , , ,806 NB GR(%) -0.3% -2.7% -0.7% -0.4% 0.2% 0.5% DT GR(%) 4.0% -9.0% -0.5% -0.6% -1.0% -1.8% Tablet GR(%) 1.3% -11.5% -11.3% -5.0% -3.0% 1.0% Source: MIC, July 2015 Note 1: GR is Year-on-Year Growth Rate Note 2: AIO PCs were consolidated into DT PC market volume -20% The recently ended replacement demand for commercial models, Microsoft s unclear subsidy policy for Windows notebook PCs, and the deferred launch of Intel s new platform all have contributed to a huge slump in global PC demand; the global tablet market has been shrinking as well, due largely in part to cannibalization of large screened smartphones, also known as phablets 3

6 Industry Concentration Further Intensified Due to Changing Growth Drivers 20% Notebook PC Market Volume Share by Branded Vendors, % Desktop PC Market Volume Share by Branded Vendors, % 15% 12% 10% 8% 4% 0% HP Lenovo Dell Acer ASUS Apple Toshiba Samsung (e) Source: MIC, July 2015 With second-tier notebook PCs fading out and the continued low-priced trend of notebook PCs, market share of first-tier notebook PCs continues on the rise; the industry concentration of desktop PCs is expected to be further intensified owing to the increasing share of commercial desktop PCs and first-tier brands continued attention into emerging market developments 5% 0% HP Acer Dell Lenovo Apple (e) 4

7 Windows PC Share Falls Below 90% Global PC Shipment Volume Share by Operating System, % 80% 60% 40% 20% 0% (e) Others 30.1% 30.9% 29.4% 28.2% Mac 5.8% 5.7% 6.5% 7.0% Chrome 0.1% 0.9% 2.1% 3.2% Android 0.0% 0.2% 0.7% 0.9% Windows 64.0% 62.2% 61.3% 60.7% Global Desktop PC Shipment Share by Operating System, 2015 Mac 4.0% Chrome 0.10% Android 2.1% Others 29.8% Windows 64.0% Global Notebook PC Shipment Share by Operating System, 2015 Others, 26.9% Mac, 9.3% Windows, 58.2% Source: MIC, July 2015 Note: Tablets were excluded here Chrome, 5.5% Android, 0.0% Owing to increasing sales of Chromebooks and Macbooks, the room of Windows OS has been significantly squeezed; the launch of Microsoft Windows 10 however is expected to only have a limited contribution to PC market share, given the fact that the latest commercial replacement just ended and Microsoft would offer free upgrades to Windows 10 5

8 Mobile Computing Market Starts to Witness Year-on-Year Decline in (e) 2016(f) 2017(f) 2018(f) 2019(f) Mobile Computing Device 333, , , , , , , ,770 Tablet Vol 140, , , , , , , ,964 NB Vol 192, , , , , , , ,806 Mobile Computing Device GR 92.0% 23.7% -0.3% -2.7% -0.7% -0.4% 0.2% 0.5% NB GR 24.0% -10.3% 1.3% -11.5% -11.3% -5.0% -3.0% 1.0% Tablet GR -1.6% 69.6% 0.7% -7.9% -6.6% -2.9% -1.5% 0.8% Tablet/Mobile Computing Device 42.3% 58.1% 58.4% 56.1% 53.3% 52.2% 51.4% 51.5% Source: MIC, July , , , , , ,000 Global Mobile Computing Market Volume, Thousand Units Growth Strong sales of 7 low priced models led to significant tablet market growth over the past 2 years; the tablet market has been losing steam since 2014, affected mainly by phablets and low-priced notebook PCs 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% 6

9 White-box Tablet Begins to Lose Momentum 50% 40% 30% 20% 10% Tablet Market Share by Branded Vendors, Apple Samsung Amazon Google ASUS Acer White Box Tablet Market Share by Operating System, % 70% 60% 50% 40% 30% 20% 10% Windows Android Chrome ios Others 0% (e) Source: MIC, July 2015 Almost two-thirds of tablets embrace Android OS and the widespread use of reference designs have led to a high level of homogeneity and limited differentiation among tablets; the tablet market thus has inevitably fallen into a vicious cycle of price competition Growing popularity of phablets has significantly eaten into the market of 7 tablets and slowed growth momentum of white-box vendors, thereby reshuffling their market positions 0% (e) 7

10 Contents Global Market Trends Product Development Trends Highlighted Topics Conclusion 8

11 Price Hinge Up Battery Mac OS & Core New Product Line to Bring Added-value to Notebook PCs NB Product Line Pricing Distribution Slim, Retina New Macbook 2-in-1/ Convertible Hinge Up Slim Panel Macbook Air Ultrabook Slim Slim Gaming/ Workstation Slim Thermal Design Hinge Design Marketing Detachable/C onvertible Netbook Chrome OS Chromebook Source: MIC, July 2015 Efficiency With the notebook PC market declining, to prevent from falling into the price competition that erodes profits, notebook PC vendors have started to increase new products lines featuring slim and lightweight form factor, HD, cloud-based applications; for instance, Chrome OS leverages cloud computing to cut down hardware costs while maintaining product efficiency 9

12 Gaming NB Brands Face Fierce Competition Gaming NB Mainstream New Competitors Expansion of Gaming NB Brands High End Mainstream To ensure the sustainability of gaming PC business, HP and Acer both launched subbrand for PC gaming for the sake of marketing Established gaming brands MSI and Gigabyte have capitalized on their product specialization to go high-end and mainstream 10

13 Branded Vendors Have Different Deployment Strategies for Gaming PC Starting Price (US$) $4, $1, $1, $ $ $ $ Acer Dell Lenovo HP Console Desktop Tower Form Factor Note: HP embraces only one model but consumers are allowed to select technical specs required online Source: Respective companies, compiled by MIC, July 2015 In the desktop PC market segment, gaming PC is the area still enjoying positive growth; SFF PC, Media Center PC and AIO PC are hitting growth ceilings Vendors have different deployment strategies for gaming PCs: Dell focuses on comprehensive deployment, HP on highlighted deployment; Acer on concentrated deployment; L on both entry-level and high-end deployment 11

14 Small Form Factor Desktop PCs Looks to Catch Coming Wave of IoT Acre Revo One A world of entertainment in a mini PC. Asrock Beebox The world s first Intel NUC Mini PC with a USB Type-C Port. ASUS ROG G20 The World s most powerful compact desktop In 2014, Intel launched NUC (Next Unit of Computing) platform, thereby driving the development of small form factor desktop PCs with weight less than 1kg; the enhanced efficiency of mobile key components and improved heat dissipation technology also help minimize the volume of gaming PCs 12

15 Thousand Units 15,000 2-in-1 Form Factor to Jump-start Consumer Demand for Tablets 2-in-1 Tablet Shipment Volume, % 2-in-1 Tablet Market Share by Branded Vendors, ,000 6% 35.2% 26.6% 4% 5,000 2% 6.7% 7.1% 24.3% (e) WW Tablet 238, , ,258 2-in-1 1,725 8,027 13,045 2-in-1/Tablet 0.7% 3.3% 6.1% 0% ASUS Microsoft Acer HP Others Source: MIC, July 2015 Note: 2-in-1 tablets were consolidated into total tablet market volume To avoid stiff price competition, several branded vendors have actively developed 2-in-1 tablets in 2015; among them, Microsoft and ASUS are the most outstanding players; MIC estimates the 2-in-1 tablet market will grow 62.5% in 2015 compared to

16 Contents Global Market Trends Product Development Trends Highlighted Topics Conclusion 14

17 Different UI Windows 10 Comes in 6 Editions to Cater More Consumer Needs Windows Hello Windows 10 and Licensing Types Windows 10 Desktop Edition High End Windows Education Continuum Universal Apps Cortana In-Place Upgrade Source: MIC, July 2015 Windows Enterprise Windows Pro Windows Home Mainstream Low End Size CPU Memory Storage Market Licensing fee During the development of Windows 10, Microsoft obtained user feedbacks from its Insider Program to ensure that it caters more to user needs with improved UI and application designs in the consumer market; additionally, Microsoft has been increasing the levels of safety and installation convenience for its Windows 10 users in the commercial market Other than the availability of Windows 10 Education, Microsoft has also cut down licensing fees to help its partners reduce hardware prices such that their products are price competitive compared to other Chromebook-like products 15

18 Chrome OS Applications Aim for Market Expansion Chromebook Shipment Volume, Chrome OS Partners 10,000 Thousand Units 6% Hardware 8,000 5% 6,000 4,000 2,000 4% 3% 2% 1% Virtual Platform Applications Volume 420 2,760 6,330 9,230 NB Ratio 0.2% 1.6% 3.7% 5.5% 0% Channels/ Markets Source: MIC, July 2015 Europe and the United States have been introducing notebook PCs for the purpose of K-12 education, thereby benefiting Chromebooks that are often priced lower and are able to provide cloud-based applications To exploit opportunities in the commercial market, Google has actively cooperating with hardware makers and channel distributors in the hope of capitalizing its cloud-based applications to capture more traction in this area 16

19 Processor Battlefield Shifting to Chrome OS Products Tablet Notebook Desktop High End Middle End Low End Source: respective companies, compiled by MIC, July 2015 Affected by the declining tablet market demand, Chrome OS products have become a new battlefield for ARM processors 17

20 Low-power Core M Processors Getting Slimmer and Lighter Tablet Detachable Convertible Ultra-slim Clamshell Cherry Trail Braswell Broadwell Y Broadwell U Broadwell H Atom Celeron/Pentium Core M Core i3/i5/i7 Type Brand Model Apple New Macbook Ultra-slim with Core M Lenovo Yoga 3 11 Asus Zenbook UX305 Efficiency Comparison of Intel s Processors GFLOPS CPU Core M-5Y31 Core M 5Y10c Core M 5Y10 Display 12.0 Retina 11.6 FHD 13.3 FHD/QHD+ Thickness 13.1mm 15.7mm 12.3mm Weight 920g 1.2kg 1.18kg Price US$1,299 US$699 US$700~1,000 Source: MIC, July 2015 HD 5500 HD 4400 HD 6000 Iris 6000 Intel launched a series of Core M processors, codenamed Broadwell, which is designed to continue Y- series processors low power consumption advantage and to better 2-in-1 NB/tablet market positioning and marketing strategies With the improved efficiency provided by Intel s built-in processors, Intel is able to boost low-powered BroadwellYprocessor to provide basic efficiencies 18

21 Valve Continues on Gaming Ecosystem Expansion Developer Tools &OS Source Engine 2 SteamOS Brand Alienware Gigabyte Asus Snapshot Model Steam Machine BRIX Pro ROG GR8S App Store & UGC Platforms Steam Gaming Steam Workshop CPU GPU Core i3~ Core i7 GTX 2GB Core i7-4770r Iris Pro graphics 5200 Core i5/i7 GeFroce 9 series Entertainment Devices Steam Machine Steam Controller Storage Device 500GB~2TB Mechanical Type 1 x 6Gbps SATA3 500GB/1TB Mechanical Type 128GB ~ 512GB SSD Steam Link SteamVR Source: Valve, compiled by MIC, July 2015 Price USD ~ USD USD ~ With built-in Steam OS, Steam Machine is able to help Valve become more independent from Microsoft s Windows and provide more flexible hardware specs 19

22 Taiwanese PC System Industry s Global Share Taiwanese PC System Industry s Global Share, Global Share of Operating Systems Adopted by Taiwanese PC Systems, Source: MIC, July 2015 The increasing in-house manufacturing ratio of Chinese makers has continued to narrow the room of development for Taiwanese companies; on the rise of emerging market demands, Chinese companies have increased the production share of local suppliers or EMS, thereby constraining the development of Taiwanese players 20

23 While PC System Market Share Sliding, Revenue Share on the Rise 100% 80% PC Products Revenue Share of Established PC Vendors and ODM Makers Intel Acer Network Comm. Product 60% Lenovo Microsoft Consumer Electronic Product 40% Asus TW ODM IoT Product 20% 0% Source: MIC, July 2015 When it comes to revenue share of individual products, PC products share of established brands and ODM makers is decreasing and they have been turning to network communications, consumer electronics and IoT applications instead HP Apple Others (eg Solar) 21

24 Wearables Remain the Most Popular IoT Applications in the Short Run Global Smart Wearable Market Volume, Smart Watch/Wristband Types Million Units 2013~2019 CAGR 62.4% % 120% Smart Watch Accessory Smart Wristband Integrated % % Standalone Detachable (e) 2016 (f) 2017 (f) 2018(f) 2019(f) Volume Growth Rate 0% Source: MIC, July 2015 RTOS Despite the proliferation of smart wearables, without clear product and market positioning, the development of wearables is still at the infancy stage; due to low entry barriers and price tags, smart wristbands and watches are expected to continue claiming the largest share of IoT applications in the short run 22

25 8,000 6,000 IoT Applications Put Vendors Manufacturing Flexibility to the Test Smart Wristband Shipment Volume by Branded Vendors, 2014 Thousand Units (4) 4,000 Smart Watch Shipment Volume by Branded Vendors, 2014 Thousand Units 4,000 2,000 - (2) (1) (1) (2) (1) Fitbit Garmin Xiaomi Nike Sony Samsung Others 2,000 - (4) (4) Samsung Garmin Pebble Sony Casio Others Source: MIC, July 2015 Note: Figures included in the bracket indicates the number of models currently available IoT has become the future of the ICT industry; however as hardware specs remain one of critical success factors for companies developing IoT, the establishment of a new business model should be highlighted as it is expected to add value to the ICT industry Taiwanese ICT vendors have been long dedicated to contract manufacturing services; however, affected by the availability of new technology, vendors focus more on strengthening their system integration and flexible manufacturing capabilities instead (4) (2) (2) 23

26 Contents Global Market Trends Product Development Trends Highlighted Topics Conclusion 24

27 Conclusion Following the recently ended replacement of commercial models, global PC market is expected to witness another setback; coupled with a higher baseline in 2014, notebook PCs and desktop PCs have both witnessed significant declines in 2015 Affected by the increasing number of homogeneous products and prevalence of phablets, the global tablet market has started to witness decline in 2015; with various home appliances brands aggressively stepping into the development of large-sized 2-in-1 tablets, MIC predicts that 2-in-1 tablets will grow considerably in 2015 compared to 2014 To take Chrome OS seriously, Microsoft has set a different pricing strategy for its Windows OS; with the tablet market declining, ARM has been gearing up its adoption in products running Chrome OS; in the gaming sector, Steam Machine allows gaming PC development to be more flexible Taiwanese contract manufacturers, though dominating the PC industry for years, need to strengthen their system integration and flexible manufacturing capabilities to produce more specialty products in small volume in the IoT era 25

28 Thank you!

29 Copyright and Intellectual Property Policy Any use or reproduction for commercial purposes without prior written permission is forbidden All trademarks, product names, and company names and logos appearing herein are the property of their respective owners The content herein represents our analysis of information generally available to the public or communicated to us by knowledgeable individuals or companies, but is not guaranteed as to its accuracy or completeness Subscription Hotline Fax Address Web Address 27