Can Microsoft Prove That Apple's Out of Touch?

Apple (NASDAQ: AAPL  ) is credited with modernizing smartphone operating systems with touch-optimized interfaces. Before the iPhone, it was hardware buttons for all phones, which are a rare breed nowadays. The iPhone maker subsequently brought the same paradigm to tablets.

There's been one category that Apple has decidedly not brought touch interfaces to: traditional PCs. Apple's decision not to pursue the segment comes from the inevitable ergonomic challenges. That's potentially an opening for rivals, and Microsoft (NASDAQ: MSFT  ) has set out with Windows 8 to prove that Apple is out of touch.

One way, or the other
Thus far, consumers have faced a tough dilemma when considering Windows 8 adoption. Traditional Windows laptops can typically be bought for $500 or less, but models with touchscreens come at a premium and cost $600 to $700. Windows 8 was absolutely built with touch in mind, even though it technically supports traditional input methods like a keyboard and mouse.

Consumers don't want to spend more, but they also want a full Windows 8 experience. Indecision stemming from this difficult choice has contributed to the PC slowdown.

However, that may all change by 2016. Market researcher IHS estimates that nearly 25% of all laptops shipped by 2016 will have touchscreens. Last year, there were a total of 4.6 million touchscreen laptops shipped, a figure that's expected to skyrocket to 24 million this year. That comparison is a little specious though, since this category only started shipping meaningfully in the fourth quarter alongside Windows 8. IHS believes that the market for touchscreen laptops will reach 78 million by 2016, or 25% of all laptops.

This potential adoption curve will be driven by falling prices for capacitive touchscreen display panels, with 2013 expected to be an inflection point. Costs are expected to get cut in half this year, which would inevitably translate into lower retail prices. Intel (NASDAQ: INTC  ) will play a role here, using its weight in component supply chains to help push down costs.

Intel ecosystem development exec Zane Ball makes it clear that Intel's goal is to "unlock new demand." The chip giant sees touchscreen PCs in general as a segment with "substantial" growth opportunities. Anything that helps boost PC units will benefit Intel, even if it's not the one selling touchscreen microcontroller components directly. Intel is doing what it can to make sure OEMs have sufficient supply of inexpensive touchscreens.

Apple's global PC market share hovers around 5%. If the forecast turns out accurate, then investors could be looking at less than 4 million touchscreen Macs (if Apple were to release such models). That's not a game-changing figure, especially since it wouldn't be incremental and would inevitably cannibalize regular Macs.

More importantly, if touchscreen laptop adoption were to hit 25%, it would be incontrovertible evidence that touchscreen laptops are here to stay, which would in turn necessitate a competitive response from Apple.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.