CRS216 The 16-bit Computer Market Jun89

This document, "THE 16-BIT COMPUTER MARKET: AN ANALYSIS," dated June 30, 1989, and prepared by Customized Research Service for Digital Equipment Corporation (internal use only), analyzes the state and future opportunities of the 16-bit computer market.

Key findings include:

• Market Definition: The study defines 16-bit computers as traditional minicomputers, supermicros (e.g., MicroPDP-11, Micro3000), and 16-bit microcomputers (e.g., PC/AT, 286-based PS/2 systems).
• Market Trend: While the installed base of traditional 16-bit systems continued to grow (reaching approximately 3 million worldwide by 1988), annual unit shipments were dramatically declining (17% global decline between 1987-1988), a trend expected to continue, with very few sales predicted by the mid-1990s. Worldwide revenue also declined by 6.9% from 1986 to 1988.

• Reasons for Continued Use/Marketing:

  • Customers: Continued purchase and maintenance are driven by cumulative experience, significant software investment, and lower cost compared to 32-bit alternatives.
  • Vendors: Vendors (like IBM) continue to market 16-bit systems due to the availability and proven reliability of diverse software, their suitability for niche applications (e.g., office automation systems, departmental servers for PCs, network control), and the substantial aftermarket and service revenue generated by the existing installed base.

• System Performance: While most 16-bit systems have been replaced by 32-bit counterparts, IBM's System/36 and Series/1 notably increased unit shipments between 1987 and 1988. This was attributed to new product announcements and a strategic refocusing (S/1 as a network/communications controller, S/36 for small/professional offices).

• Identified Opportunities for 16-bit Systems:
  • Applications not requiring the power of 32-bit systems (e.g., embedded processors in copy machines, fuel injection).
  • Laptops utilizing 16-bit microprocessors.
  • Markets in third-world and Soviet bloc countries where older technology import is permitted and sufficient.
  • Low-growth markets or customers new to automation, particularly unsophisticated small businesses and professional offices (IBM is noted for penetrating these non-PC class markets).
  • Specific industries like construction and commercial property management, where automation is low, users are less sophisticated, and high speed/power isn't critical.
  • Enhancements like 386 accelerator boards to extend processor life by off-loading applications.
  • Potential roles as PC hosts/servers, network controllers, communication systems, remote network management, and terminal servers.

The report emphasizes that the viability of these opportunities must be weighed against their cost and risk, with cost and software compatibility being primary driving factors for choosing 16-bit over 32-bit systems.