Low-cost PCs vs. Innovation?

06 Aug 2007|Added Value

The rural poor in emerging markets may or may not ever be able to buy their own PC…or even want one. But there’s an alternative, already developed by Intel, to provide a shared “Community PC.” . It was designed for a shared usage model, at a village “kiosk”, somewhat similar to the Internet cafés that are already a widespread phenomenon in many emerging markets. So there are technical and financial alternatives to the one-per-person model.

Low-cost PCs are ‘sprouting up’ all over, whether the $199 PC from Lenovo, or Negroponte’s One Laptop Per Child initiative, or Intel’s Classmate PC . There’s lots of goodness, people claim, in making PC’s accessible to everyone. But what’s good for short-term market penetration may bode ill for long-term innovation in the category.

These low prices translate to lower revenues and lower margins for PC makers. Some have responded by diversifying, some by shifting R&D and marketing expenses to other categories, such as HD-TV’s, and still others (IBM) by exiting the PC category altogether. In the long-run, PC innovation gets less money and less attention…and consumers and business users get less innovative and compelling products.

Many would say this has already happened, with the biggest innovations in TVs and cell phones, while innovation in PCs has been tepid at best…which brings us back to all that potential in Emerging markets…as my colleague, Leigh Marriner asked: If these consumers can get most of what they want on their cell phone …why do they need a PC? And if that’s true in Emerging markets, why not the so-called “mature” markets as well? This shift in innovation to Consumer Electronics and cell phones may relegate PCs back to where they started: as an office productivity tool.

So the PC industry faces perhaps its greatest challenge in years: not just “innovate or die,” but innovate cost effectively, in a declining margin business, in a global market.

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