Qualcomm and Microsoft fuel PC market revival with AI pitch

Technology companies from Microsoft to Qualcomm are launching marketing offensives for a new type of computer they're calling the AI ​​PC, promising to build artificial intelligence capabilities into their laptops and desktops.

The new laptops differ from standard devices in that they come equipped with an additional processor customized to speed up AI features such as personal assistants and task automation capabilities.

But only 3% of PCs shipped this year will meet Microsoft's benchmark for processing power to be considered an AI PC, according to industry research firm IDC. To convince consumers and businesses that now is the time to buy, the industry needs to offer a wider variety of PCs and software that takes advantage of the new hardware.

So far, analysts and commentators have also expressed skepticism about the new laptops' AI capabilities. Eric Compton, a financial analyst at Morningstar who focuses on the PC industry, said their usefulness is limited because software makers other than Microsoft haven't built the capabilities to take advantage of the new chips into machines optimized for AI tasks.

App makers including Adobe, Salesforce and SentinelOne have rejected requests from the biggest PC makers to adapt their software to use AI tools directly on the new computers in time for their launches, according to people familiar with the talks. All of the companies provide their AI capabilities through the cloud.

SentinelOne is considering optimizing its products for AI PCs in future developments, but it will probably be years before such devices reach a significant percentage of deployed machines, said Gregor Stewart, the company's vice president of AI.

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Clara Shi, head of Salesforce's AI division, said the company is developing on-device language models, the technology that underpins many types of generative AI, but didn't say when they might be released.

Some smaller software makers have optimized their apps for on-device AI, including Blackmagic Design, which makes video editing software that competes with Adobe's Premiere, and Algoriddim's music mixing tool djay.

For now, the available AI features are mostly gimmicks, said a Best Buy employee shortly after the launch in June, who asked not to be named for fear of professional repercussions.

The machine, called Copilot+ PC, is limited to features such as tools that make it appear as though you're looking at the camera during a video conference while in reality your gaze is focused elsewhere. It can generate images on the device using generative AI models, but requires an internet connection for content moderation. Recall, Microsoft's flagship feature that would have made it easier for users to find past activity on their computer, has been delayed due to privacy concerns.

A Microsoft spokesman said developers have shown great enthusiasm in building apps to take advantage of the new hardware, and that user feedback on the new devices has been excellent.

The stakes are high for many of the companies involved. Qualcomm, the supplier of the new chips, has said it's ready to challenge Intel's dominance in the machine. PC makers such as Dell and HP hope the machine will reignite consumer interest in personal computers. But to avoid past dead ends, such as the short-lived Windows mobile operating system and detachable screens, the companies need to ensure the performance matches their marketing.

An HP spokesperson said the company is touting existing features such as real-time translation while also working with software vendors to build new experiences for AI PCs.

Even with limited capabilities today, AI PCs have the potential to spark a new wave of higher-priced PC purchases, as many consumers, businesses and schools bought laptops early in the pandemic but have yet to upgrade.

The company's founder and CEO, Michael Dell, said the new AI features will help steer buyers toward higher-end options: “Do you want to buy a PC that can't run the AI ​​features you'll want to use in the future? I don't think so.”

The company is starting to see signs of momentum: One in five PCs sold in their launch week were AI PCs, according to data from market-research firm Circana. Content creators and other tech-savvy consumers have been quick to adopt the new machines, but the general public still seems a bit hesitant, said Mike Crosby, executive director at Circana.

Another big selling point is longer battery life than other laptops that use Microsoft's Windows operating system. Qualcomm claims that more efficient chips based on Arm designs allow the laptops to go for days without a charge. Avi Greengart, an industry analyst at Techsponential who helped organize Qualcomm's promotional event, said battery life, not AI, is the laptops' main selling point right now.

But the different chips could cause compatibility issues with generations of software written for processors from Intel and Advanced Micro Devices Inc. Popular apps like Microsoft Office, Meta Platform's WhatsApp and Adobe's Photoshop are optimized for Arm-based systems. But many legacy applications still in use in the enterprise will likely not be supported, limiting enterprise adoption, said Eric Woodring, an analyst at Morgan Stanley.

Qualcomm acknowledges it needs to do more to promote its own brand and help PC makers advertise, a necessity after the industry has relied on Intel's advertising dollars for decades under Intel Inside, arguably the most successful components campaign of all time.

Consumers in particular have been trained to see the label on their computers as a sign of quality, and Intel has been successful in pushing its sub-brand forward: Its 2003 push of Centrino, which built in Wi-Fi connectivity, led to an explosion in laptop usage.

Qualcomm, which has previously tried and failed to grab market share in PCs, is now spending more than $75 million a year to stamp its Snapdragon processors on the uniforms of Manchester United Football Club players and is also increasing payments to PC makers and other partners for marketing assistance, said Chief Marketing Officer Don Maguire.

“It's temporary now, but this has to be sustainable,” Maguire said. “This isn't about the next six months, this is about the next six years.”

The average starting price for Qualcomm's new AI-enabled PCs is about 48% higher than non-AI PCs, wrote JPMorgan Chase analyst Samik Chatterjee, who sees Qualcomm capturing about 25% of the AI-enabled PC market by 2026.

Later this year, Intel and AMD are expected to release their own AI PCs, which should reduce compatibility issues associated with Arm-based devices.

Still, consumer and business adoption will be a long one: Even by 2026, AI-enabled PCs will account for only about 20% of new PC shipments, according to IDC. Bloomberg

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