AI PCs are here to disrupt market: How fast can they become truly useful?

On June 29, 2007, Steve Jobs unveiled the first iPhone, promising the capabilities of an iPod, mobile phone, and internet functionality rolled into one. But it was only when Apple introduced the App Store, in 2008, that the iPhone started to find widespread appeal.

Seventeen years later, on May 20 this year, Microsoft CEO Satya Nadella introduced the Copilot+ PCs. These are personal computers loaded with artificial intelligence (AI) features.

“It is a pivotal moment, quite similar to the mobile phone industry pivoting from feature phones to smartphones,” says Ashish Sikka, Director and Category Head, Lenovo India.

And just like the pivot from features phones to smartphones, AI PCs of today face a challenge. Since the technology is nascent, use cases are limited.

What is an AI PC?

In late 2023, the term AI PC was coined for computers with next generation processors. An AI PC is one built with hardware, specifically a neural processing unit (NPU), that performs AI processing locally. This NPU exists besides the central processing unit (CPU) and graphics processing unit (GPU) that PCs come with.

AI devices enable accelerated execution of AI functions of all types on the local PC itself, rather than relying on the cloud. They offer better power efficiency and improved responsiveness, since the CPU and GPU are available for other tasks.

“Currently, use cases (for AI PCs) include features like hyper personalisation – be it drafting emails, gauging downtime of users, etc. They are able to carry out a lot of tasks on the local PC, without relying on the cloud. A lot of data, thus, remains on the host PC, which improves efficiency. 

Third is improved security, since a lot of the data remains on the host PC,” explains Sikka.

These PCs can be separated into three categories — AI basic laptops, AI-advanced laptops and AI-capable laptops — based on computational performance, corresponding use cases, and efficiency of computational performance. With original equipment manufacturers (OEMs) launching more AI-advanced and AI-capable models, upcoming PCs will be equipped with enough tera operations per second (TOPS) powered by NPUs to perform advanced generative AI tasks well.

 

Microsoft’s X factor

After the first mainstream corporate Windows laptops with an NPU powered by the Intel Core Ultra processor arrived in the second quarter of 2024, other chip manufacturers such as AMD, Qualcomm, and Apple have jumped into the fray.

“The first wave of AI PCs will gradually come up with three major CPU platforms: Intel Meteor Lake, AMD Hawk Point, and Qualcomm Snapdragon X Elite series. These vendors are also preparing for next generation solutions for AI laptop PCs rolling out later this year, which will accelerate the adoption of AI PCs at multiple price points,” says Brady Wang, Associate Director at research firm Counterpoint.

With the launch of the Copilot+ PCs in India on July 11, Microsoft is likely to lead the charge. Touted as the “fastest, most intelligent” Windows PCs ever, Microsoft says its Copilot+ laptops, which are powered by Qualcomm’s Snapdragon X Elite and Snapdragon Plus processors, offer a “quantum leap”.

“We see AI PCs as a transformative opportunity that can disrupt the PC market. With new advanced AI experiences integrated into the devices, they will enable users to do things they cannot on any other PC, helping them be more productive, creative and communicate more effectively,” says Shruti Bhatia, Country Manager, Modern Work and Surface, India and South Asia, Microsoft.

OEMs such as Acer, ASUS, Dell, HP, and Lenovo have announced Copilot+ PCs.

Indian OEMs bet big

Although it is still early days, Indian PC makers have reported that demand for AI PCs has been “beyond expectations” and many of them expect AI to drive shipments. 

PC market leader HP, for instance, unveiled its series of Copilot+ laptops for commercial and consumer segments last month. It is betting big on its AI PCs to drive growth in segments like small and medium businesses, large enterprises, and education.

HP’s new laptops, the EliteBook Ultra and HP OmniBook X, come with a built-in HP AI Companion, a personal AI-assistant, a new Poly Camera Pro, and improved security.

Ipsita Dasgupta, Senior Vice President and Managing Director, HP India, says AI PCs will be a growth driver not just for HP but for India, across commercial and consumer segments.

“In the next year, we will see at least 10 per cent of all PCs sold will be AI PCs across the industry. And over the next two or three years, we expect to see this figure go up to almost 50 per cent,” she says. “Overall, we see the total addressable PC market doubling over the next five years, and AI will be a huge driver for that,” she added.

While HP has a longer-term view, others like Lenovo, which is the fourth largest PC manufacturer in India, is confident that these devices will make significant progress this year.

Lenovo’s Sikka believes around 20 per cent of the consumer market will be an AI PC market by the end of this year. “As we progress, adoption will be much faster,” he says.

In anticipation of the demand, Taiwanese manufacturer ASUS, fifth in market share, has doubled its forecasts for AI devices this year.

“The demand has been beyond our expectations,” says Arnold Su, Vice President–Consumer and Gaming PC, System Business Group, Asus India. “By the end of this year, our target is that AI PCs should account for between 5 and 10 per cent of our shipments. And from next year onwards, this will gradually increase.”

ASUS launched India’s first Copilot+ laptop, the ASUS Vivobook S 15 OLED, last month and plans to launch another five to 10 AI PCs in India this year.

Slow burner

India’s PC market, inclusive of desktops, notebooks, and workstations, shipped 3.07 million units in the first quarter of 2024, up only 2.6 per cent over January-March 2023, after consecutive quarters of double-digit growth, according to data from the International Data Corporation.

However, with the advent of AI PCs, the “softness” in the market is beginning to subside. OEMs, across the board, expect shipments to buoy.

“From the second half of the year onwards, we expect things to be better driven by AI PCs. Even in H1 (first half), lots of customers have been waiting for AI PCs to come into the market before they make a purchase. So, the market should be better as the refresh cycles kick in,” says Su of Asus.

AI PCs may see quicker adoption on the commercial side. Analysts at Gartner say all enterprise PC purchases will be an AI PC by the end of 2025-26. But the uptake among individual buyers could be slower.

Aside from the relatively limited use cases, the higher price band of AI PCs may prove to be a deterrent.

“This year, the price band (for AI PCs) will be on the higher side. So, AI will be a growth engine but may not be a major top margin contributor,” says Su.

Globally, Counterpoint estimates that almost half a billion AI devices will be sold during the period between 2023 and 2027, with these PCs reviving the replacement demand. However, despite the “quantum leaps” of AI computers, analysts say large-scale adoption will take time, with demand picking up from 2025 as more use cases surface.