How Can You Have a PC Industry When Computers Cost $25?

Last Updated Aug 30, 2011 8:30 AM EDT

The death of PCs is on its way. Of course, PCs won't disappear entirely. But most people will use other devices because they just don't need the excess computing capacity of a PC when a simpler, if less capable, device will do.

Let's take a second to ponder what that means with respect to keeping the PC industry alive. Machines are getting cheaper and margins lower, which will eventually starve many existing PC makers of profit. Want proof? How about a $25 PC the size of two coins?

Oh, one more thing: This tiny, cheap device can run a high-definition graphics game like Quake 3.

The computer is called the Raspberry Pi, from a British non-profit called the Raspberry Pi Foundation. The device looks like it could fit into an older USB memory stick, and yet it can run a 1920x1080 display at 20 frames per second. Here are some of the specs:

  • 700MHz ARM11 CPU
  • 128MB or 256MB of SDRAM
  • 1080p30 H.264 high-profile decode
  • Composite and HDMI video output
  • USB 2.0
  • SD/MMC/SDIO memory card slot
  • General-purpose I/O
  • Optional integrated 2-port USB hub and 10/100 Ethernet controller
It's not state of the video-mayhem-art by any means, but, jeez, that's pretty amazing. And so cheap.

Prices have already been tumbling in the market. To get ready for the arrival of Hurricane Irene, I bought a new HP laptop -- $300 at a chain store. Not exactly a top-of-the-line machine. But with a dual-core processor and 4GB RAM, this is a machine that would have blown virtually anything out of the water 10 years ago. It would have held its own 5 years ago. Now? It's commodity hardware.

Still wondering whether if it's smart for HP to get out of the PC business? Thinking that PCs will be around forever?

The PC as we know it is the result of an industry that could make billions of dollars by cranking out ever more powerful devices that provided more computing than most people ever really need. Eventually, though, many companies are likely to find that it's a business that isn't isn't worth being in.

Acer just had its first quarterly loss. IBM pulled out of PCs years ago for a reason. HP is looking to do the same ... for the same reason. There's too much work and investment for too little profit in the PC industry, and companies realize this.

How long before the Raspberry Pi Foundation or some other organization becomes the next Dell by offering people what they need at a far lower price than anyone else does? The Raspberry Pi can't compete with a normal PC, but it wouldn't necessarily take that much more before it could. (And, remember, Microsoft (MSFT) plans a version of Windows for ARM chips.)

How much longer can the traditional PC survive if the industry that supports it runs away to do something else?


Image: Raspberry Pi Foundation
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.