PC-on-chip spells end for consumer hardware costs

1999-07-16

It’s all coming together. A number of announcements, from NatSemi, Microworkz, Tiny, AOL, MSN and SEGA to name but a few, are indicators of convergence in (or on) the consumer market. Let’s look at them.

- National Semiconductor unveils the Geode, which combines PC functions onto a single chip. Proposed market: set top boxes, mobile phones and handheld devices.

- Microworkz plans to distribute its sub-£200 iToaster PC through Dixons

- Tiny Computers in the UK start giving away PCs to subscribers to their newly-launched telecommunications service.

- AOL and MSN offer free PCs to users taking out a three year subscription to their online services.

- SEGA announce that their Dreamcast console will have Internet access.

What does all this mean? NatSemi’s announcement equates to reducing the cost of PC-type devices to well below the current level. Microworkz’ iToaster is a set-top-box lookalike PC which demonstrates the way the technology can be taken – interestingly, the iToaster runs Linux, mainly (it is understood) to avoid the increased cost that would be incurred if a commercial operating system was being used. Tiny are giving away a £300 PC, which is as good an indicator as any of the maximum amount of material which can be “given away”. AOL and MSN demonstrate the head-to-head battles that are going to be fought by the internet giants – indeed are already being fought, exchanging hardware for mindshare. SEGA’s announcement is indicative of the scale of the convergence, as the games console becomes as powerful as a PC (if not more) and sports similar functionality.

There are plenty more announcements from the past few months which could be quoted, all indicating service providers giving stuff away, hardware getting cheaper (and therefore easier to give) and different devices – consoles, receivers and computers – becoming one and the same. To extrapolate only slightly, we can see consumer hardware giveaways becoming the norm over the next 18 months. This appears good news for the materialistic amongst us, but only because the situation is being judged relative to the recent past where such hardware would cost well over a grand. In fact, consumers have short memories and will come to expect such deals.

What is likely to cause more of a stir are the shockwaves expected to reflect back onto the industry itself. Hardware manufacturers are already seeing their profits cut to the bone as they compete for volume sales. Convergence suggests that previously ring-fenced groups of manufacturers will find themselves pitted against each other. Their markets will be less and less directed at the consumer, however, they will be selling to the service providers. Here, also, we expect the current shakeup to continue. Resellers could be the worst hit, unless they reorient their channels – peripheral devices such as printers, imaging devices and storage have a longer life, but pure PC sales will be damaged significantly.

The bottom line is that the computer and service infrastructure will, in the future, have little more than gadget value to the consumer market. People will purchase what they consume and need – food, clothes, bricks and mortar, the latest film. IT will act as an enabler for these purchases and will take its cut from their suppliers, but the time of buying PCs for their own sake is virtually over.

(First published 16 July 1999)