PC sales dropped further last year as manufacturers staggered technology releases to include enough features to appeal to new customers.
Meanwhile, consumers and businesses alike are looking into how new technologies such as smartwatches and wearables could benefit them.
A recent whitepaper by telecoms advisory and investment firm Delta Partners suggested that companies, especially in the service and hardware industries, are adopting radical innovation tactics to survive in the current market.
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However, it only takes the eye of the consumer to notice that many new devices are similar to their predecessors. For example, Apple's iPad mini and iPad mini Retina are practically identical, and Samsung's Galaxy S5 smartphone is very similar to its S4 predecessor.
ARM developer Sophie Wilson believes innovation in the PC market has gone downhill. "Somewhere in 2006, PCs stopped getting any better," she says.
Wilson predicts a similar decline in smartphones once improvements to particular features have been exhausted. "At some time, mobile devices will hit that limit as well, but for the moment they’re still on that sharp rise in capabilities that we saw in PCs," she says.
The slowdown in smartphone shipments may already be happening, going by recent sales data.
Gartner analyst Anshul Gupta says smartphone sales are currently levelling out, especially in mature markets, due to technology fatigue among consumers. In other words, people cannot justify the cost of a new phone due to the lack of differentiation between models.
"That has led to a longer replacement cycle, which is affecting sales in this market," he says.
This drop in interest as the smartphone market matures is an indicator of an upcoming dip similar to that of the PC market.
The PC fights back
According to another Gartner analyst, Ranjit Atwal, the sharp decline in PC sales has sparked greater innovation in the market, including the creation of hybrid products that are both PCs and tablets, along with touch-screen PCs inspired by Microsoft's Windows 8 operating system (OS).
More on the struggling PC market
"[Innovation has] increased to a point where PCs are at last catching up and are now what they should have been two or three years ago – they’re touch-enabled, they have longer battery life and they’re thinner and lighter," says Atwal.
He believes that although mature markets will only invest in PC hardware when upgrading, these new innovations will lead to growth in emerging markets.
But there is no escaping the fact that Gartner’s fourth quarter 2013 PC market share data reported 2.9 million PC shipments in the UK – a decrease of 6.7% compared with the same period in 2012.
Gartner expects a continued decline in PC shipments over the next couple of years. Its research has found that people are making greater use of tablets to perform tasks they used to run on a PC. As a result, PCs are not being replaced as frequently, leading to falling sales.
Despite these indications, PCs are likely to carry on as part of the device mix used by consumers and business people, since there are many applications which only make sense on a PC. For instance, analysing a complex spreadsheet of sales data can be far easier on a PC, with a generous display screen and plenty of local processing power and installed RAM.
Lenovo CEO Yang Yuanqing recently told McKinsey that the PC market will never die, as the experience offered by a tablet simply cannot equal that of a desktop PC or laptop.
But the decline in PC shipment figures cannot be ignored, and PC sales are still losing out to tablet sales in the hardware space. With wearable technology also slowly seeping into the market in the form of smartwatches and performance monitors, could we see the same decline for tablet PCs in the future as consumers take to even smaller technologies?
ARM's Wilson believes hardware companies are still doing all they can to innovate. She says in what is currently a very software-driven environment, hardware companies are still upgrading their products. She points out that just because the outside hasn't changed much does not mean they are not measurably better than the previous release.
"The iPad Air is innovative in terms of the mechanical structure and how Apple put something together that’s so much smaller and lighter. A 28% reduction in volume weight for the iPad Air – the engineering there is magnificent," she says. "[The iPad mini] looks almost identical to the previous one, but it has a retina display and the processor is mind-blowingly faster."
Mark Ridley, director of technology at job site Reed.co.uk, points out that we're looking at a form factor that is decided by something that doesn’t change much – human physiology. "If you have a phone, it probably has to fit in a human hand, and the distance between ear and a mouth is probably roughly the same," he says.
Even if it's been a few years since we saw the last massive [hardware] innovation, I'm sure there will be another one, and another one after that
Mark Ridley, Reed.co.uk
Ridley believes innovation is often driven by customer demand, and this is limiting the next big change in the smartphone space.
He says technology such as smartwatches and connected devices are a transitional step into the next level of consumer hardware, which will in turn drive change in workplace technology: "You’ll have that initial spike, and then there will be a consistent and strong increase in the take-up of those devices."
How these new technologies could be used in the workplace is already being considered. AIA Worldwide recently released some concept videos demonstrating how Google Glass could be used in a business environment. Alastair McAulay, an IT expert at PA Consulting Group, says businesses need to start thinking about how wearable technology fits into their IT strategy in order to survive.
Gartner’s Atwal points out, however, that client devices are on an evolutionary curve, building on previous generations of technology. "[Tablets are] the next evolution of netbooks as much as anything. When people look back, netbooks were the next inauguration of a smaller, thinner, lighter type of PC," he says.
Despite this, it seems technologies such as this may evolve to become vitally important in the healthcare industry, and are already nudging people towards healthier lifestyles.
So is hardware innovation dead? Ridley believes wearable tech is the perfect example of the next generation of hardware. "We're waiting for whatever the next big change is, so even if it's been a few years since we saw the last massive innovation, I'm sure there will be another one, and another one after that," he says.
Changing shape of innovation
Hardware innovation is driven by Moore’s Law, which observes that the number of transistors on a microchip has doubled approximately every 18 months. But this innovation through greater transistorisation is reaching the limits of physics.
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Simon Moore, a lecturer at the University of Cambridge Computer Laboratory, says he knows of no other industry which has produced faster, cheaper and lower-power things at such a rapid pace. "I don’t think you can argue that the industry restrains itself by much at all. There is still a great deal of innovation in the hardware industry, though it is maturing and there are limitations to miniaturisation as we near atomic sizes," he says.
The miniaturisation of technology into small wearable items is being pushed forward by consumer demand. The jury is out as to whether the major PC manufacturers will jump on the bandwagon and have something to offer against Samsung and Apple in the smartwatch and wearable market.
As Moore points out, miniaturisation cannot go on forever. After this point intelligent devices will not get any smaller. Perhaps the real innovation will be in software.
Some experts argue Steve Jobs' true genius was tying Apple hardware products to a software platform through iTunes. Microsoft and Sony have shown what is possible by creating a software and home entertainment hub around their respective games consoles. And smart televisions from the likes of Samsung live and die by their mix of apps and content.
Key for the PC industry is whether the manufacturers can create a unique software and content identity beyond the Windows PC moniker.
In the enterprise space, Dell and HP have spent billions of dollars building software businesses. Time will tell whether these software divisions will influence the buying decisions of the professional buyer in the same way that the availability of an online service influences consumer choices.