Demand dichotomy: PCs down, iPad up

While Wall Street analysts have turned bearish on PC and chip demand, they’re still bullish on forecasts for Apple’s iPad. Does this tell us something about the future of the PC industry?

An Apple store on first day of iPad sales: iPad shipment forecasts continue to get hiked. That can't be said about PCs. (Credit: Brooke Crothers)

Intel, Advanced Micro Devices, and Nvidia–three of the leading PC chip stocks–have taken a beating in the last two days, largely driven by reports from Wall Street analysts, such as J.P. Morgan’s Christopher Danely, who warned investors that PC orders are “falling off a cliff.” Barclays Capital also had dour things to say about overly optimistic predictions by Intel and AMD–who together supply processors for virtually all of the world’s PCs–when the two companies announced earnings last month.

In general, analysts are citing a weaker outlook for consumer and corporate computer spending worldwide.

Seemingly immune to all of this is the iPad. Shipment forecasts for Apple’s 10-inch class mobile device continue to get raised, with analysts now predicting that well over 10 million iPads will ship this year (one analyst at Robert W. Baird is now predicting up to 15 million). And this explosive growth, to some degree, is eating into low-end laptop sales.

And maybe equally worrisome for PC chip suppliers is that the iPad is not powered by a traditional laptop processor. It uses Apple’s A4 chip, which also powers Apple’s new iPhone 4. So PC chipmakers are not tied in any way to the the iPad’s phenomenal shipment numbers.

Indeed, Apple has a unique market-making opportunity, as no major computer makers are currently shipping 10 inch-class tablets that rival the iPad, which went on sale April 3. That said, tablet competition will likely heat up later this year or next year when Android and Windows-based tablets are expected to come to market in force. Windows tablets are expected to be powered by Intel chips.



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