The PC market is shifting

The companies you know as computer makers buy, not make, all the component parts. Who’s to say the component makers can’t get into the game as well?

By Jon Peddie

Perhaps you’ve noticed the subtle but unrelenting move by component suppliers to enter into the device/systems/appliance markets. Intel did it with medical devices about four years ago; Microsoft did with the Xbox, then Xen, and lately tablets; Nvidia did it with Grid servers and Shield (and, some argue, with tablets); AMD did with Sea Monkey servers; and both AMD and Nvidia build AIBs that get re-badged by their partners. Cisco does it too (mostly through acquisitions), and Google makes phones, tablets, and OTT TV. There are very few pure ingredient suppliers these days.

The brand name says "Toshiba" but like every other PC vendor, all the parts come from somebody else. (Source: Toshiba)
The brand name says “Toshiba” but like every other PC vendor, all the parts come from somebody else. (Source: Toshiba)

The irony is that the device/system/server companies used to make their own silicon components. They exited those markets because of the associated costs of research and development, support, and in some cases even manufacture costs. The component companies may have been envious of the value-add profits the system builders were getting, but avoided it because of the marketing and support costs.

Today, largely due to Intel’s extraordinarily successful “Intel Inside” campaign, the component suppliers have expanded their investments in marketing and established powerful brands. So powerful are their brands that they can go into to the systems business and be successful.

The system builders, particularly the PC builders, have been in a tight spot with no prime IP other than box construction. Companies like Acer, Dell, Lenovo, HP, and Toshiba buy everything—the motherboard, the OS, the boards, disk drives, monitors, and power supply. They are basically assembly houses with great looking boxes and strong brands. Some of them have software apps for multimedia and security, and the bigger ones guarantee system integrity—all those disparate parts work together.

Where will this lead? Will Intel, AMD, Nvidia, and Qualcomm start making PCs, tablets, and phones? Why not? They basically make them now in the form of reference designs. What’s to stop them from going all in on the systems business? If they do, then what happens to the traditional box builders? Do they start buying semi companies to compete? You see, everything you know is wrong, and you can’t predict the future.

Jon Peddie is president of Jon Peddie Research, publisher of GraphicSpeak.