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Paul Thomas<\/strong><\/em> <\/strong><\/p>\n
\nChief Economist, Intel
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In 2012, China will almost certainly achieve another first, surpassing the U.S. to become the largest national market for computers as measured in units.\u00a0 In 1995, China consumers, businesses, and government enterprises purchased 3% of the world\u2019s PCs and servers.[1] The U.S. purchased 39% of the world share that year.\u00a0\u00a0 In 2011, each country\u2019s end users purchased 19% share.\u00a0\u00a0 How did China catch up with the US in the size of its final market for PC sales in just 16 years?<\/p>\n
This account is based on Intel\u2019s best estimates of the demand for PCs over the past 16 years.\u00a0 I thank Intel Corporation for allowing the use of these numbers, but Intel bears no responsibility for the use or misuse of these results.<\/p>\n
Before parsing the growth figures to see what drove the rapid convergence of China to U.S. results, we need to discuss the data issues behind this work.\u00a0\u00a0 The data behind PC purchases and uses can be characterized as sparse and poorly conditioned.\u00a0 Markets for PC components such as CPUs, hard disk drives, and LCD panels as well as the markets for assembled PCs are global.\u00a0\u00a0 Laptop computers and a number of desktop PCs generally are assembled in Asia and often in China.\u00a0\u00a0\u00a0 Imports and re-exports of components and assemblies are the rule.\u00a0 Once PCs are fully assembled, they are sold through a variety of venues.\u00a0\u00a0 Outside of the advanced economies, so called \u201cchannel\u201d points of sale are favored.\u00a0\u00a0 The \u201cchannel\u201d points of sale range from formal, permanent stores with large displays, branded systems, and documented transactions to small, temporary kiosks with undocumented sales, little or no tax collection, and little or no licensed software.\u00a0\u00a0 To complicate matters further, PCs are durable goods and, once purchased, can remain in a household or enterprise until \u201crefreshed\u201d and can stay in a country or the world installed base for a time ranging from a few weeks to many years.\u00a0\u00a0\u00a0 Hence, the uncertainty about sales figures pale compared to the uncertainties about the installed base of PCs.\u00a0\u00a0\u00a0 Keeping these difficulties in mind, the reader will appreciate that all of the numbers presented here are estimates; indeed, they are \u201cmodeled\u201d more than they are \u201cdata\u201d in the popular parlance.<\/p>\n
Total PC sales were 15 times higher in the U.S. than in China in 1995 and were at parity by 2011.\u00a0\u00a0 Convergence to total parity does not mean parity in all particulars, of course, but the convergence was remarkably uniform.\u00a0\u00a0 In 1995, U.S. business PC purchases were 12 times higher than China\u2019s.\u00a0\u00a0 By 2011, the U.S. advantage in business purchases was only 1.1 with parity likely in 2012.\u00a0\u00a0 As befits the large public domain in China, U.S. government plus education purchases were only 7 times higher in the U.S. than in China in 1995 but China public purchases exceeded U.S. purchases by 5% by 2011.\u00a0\u00a0 The most dramatic change occurred in consumer demand.\u00a0\u00a0\u00a0 The U.S. advantage shrank from 49 to 1 in 1995 to a 4% deficit by 2011.\u00a0\u00a0 The early China consumer sales numbers, however, should be regarded as very rough estimates.<\/p>\n
While the various demand segments converged, there was also convergence among devices.\u00a0\u00a0 Desktop PC purchases in the U.S. outnumbered those in China by nearly 14 to 1 in 1995 but by 2011, China had a 62% advantage.\u00a0\u00a0 Parity in desktop purchases was obtained in 2006.\u00a0\u00a0 Notebook purchases in the U.S. were 44 times greater than those in China in 1995 but only 39% greater by 2011.\u00a0\u00a0 Convergence has been very rapid even for notebooks, once considered luxury items compared to desktops.\u00a0\u00a0 Servers were still purchased in the U.S. at 2.5 times the rate in China in 2011 but even this has converged from the nearly 7.5 multiple in 1995.\u00a0\u00a0\u00a0 Server purchases are expected to be greater in the U.S. than in China for several more years as data centers expand quickly in the revitalized U.S. market.\u00a0\u00a0 However, China government and business leaders have demonstrated strong interest in an expanding Chinese Internet presence that will likely lead to more domestically hosted data centers and eventual parity with U.S. unit purchases.<\/p>\n
Parity in PC and server purchases between China and the U.S. will inevitably be followed by outsized Chinese purchases.\u00a0\u00a0 China\u2019s four to one population advantage over the U.S. has and will overwhelm the very large (but narrowing) U.S. lead in per capita income.\u00a0\u00a0 While there are significant differences in the Chinese adoption of technology, the importance of rising GDP and falling computer prices has made convergence with the U.S. numbers inevitable.\u00a0\u00a0 The driver of this convergence can be seen in an affordability measure: how many weeks of average per capita income did it take to buy the average purchased PC in China and the U.S. in the past and the present?\u00a0\u00a0\u00a0 We\u2019ve calculated these figures for 1995 and for 2010.\u00a0\u00a0 While it took an estimated 100 weeks of average income in China to purchase the average consumer desktop in 1995, and 176 weeks of average income to purchase the average consumer notebook, it took only 5 weeks to buy the average desktop and 7 weeks to buy the average notebook in 2010.\u00a0 In the U.S., the 5 weeks of income for the average U.S. consumer notebook and the 3.4 weeks for the average U.S. consumer desktop narrowed to only 5 days of income for a desktop or a notebook by 2010.\u00a0\u00a0 Even in the U.S. the falling prices for rapidly improving PCs enabled by Moore\u2019s Law have driven robust purchases for decades now.\u00a0\u00a0 In China, the steady decrease in prices for better and better PCs has combined with rapidly increasing incomes to lead to the displacement of the U.S. as the largest national market by the still rapidly growing China market.<\/p>\n
<\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n Paul Thomas<\/strong><\/em> <\/strong><\/p>\n<\/a><\/p>\n
\nChief Economist, Intel
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