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PC market hit by sharpest decline since 2013

Ranjit Atwal, Gartner

IT budgets are shifting away from PCs toward business continuity planning, say analysts.

Well, that didn’t take long. Global PC sales have declined sharply in Q1 compared to a year ago as the February lockdown in China begins to reverberate through supply chains. At the same time, there’s unprecedented demand from businesses retooling their operations for a remote workforce.

Gartner put the decline at 12.3%, saying it was the sharpest since 2013 when floods in Thailand hampered hard disk drive production. IDC has the figure at a 9.8% decline, and Canalys says it will contract by 8%.

“The single most significant influencing factor for PC shipment decline was the coronavirus outbreak, which resulted in disruptions to both the supply and demand of PCs,” says Mikako Kitagawa, research director at Gartner. “Following the first lockdown in China in late January, there was lower PC production volume in February that turned into logistics challenges.

“Once coronavirus-related lockdowns expanded to other regions, there were new, sudden pockets of PC demand for remote workers and online classrooms that PC manufacturers couldn’t keep up with.”

Kitagawa’s colleague Ranjit Atwal tells The Margin that production in China had started to ramp up in March, but was slow, in part because of social distancing being enforced in factories.

And with the spread of Covid-19, other countries also instituted lockdowns, which slowed the distribution of downstream components, such as lithium used in batteries, says Atwal. Lastly, the fragmentation and availability of transport slowed the delivery of products.

Business continuity

Atwal says production levels recovered in March, and the availability of CPU, memory and screens are now largely unhindered.

Kitagawa says Q1’s vendor results underscore the economic uncertainties that are tightening spending on PCs, particularly among SMEs.

She says that this uncertainty, paired with the end of the Windows 10 upgrade period, means that businesses are shifting their IT budgets away from PCs toward business continuity planning.

 

“We will start seeing businesses and consumers alike extending their PC lifecycles on a more permanent basis as they focus on preserving cash,” says Kitagawa.

Despite the pandemic, Lenovo, HP Inc. and Dell’s market share remains unchanged from the previous quarter. Gartner says these vendors account for 65.6% of PC shipments, up from just over 60% in Q1 2019.

Lenovo’s shipments declined 3.2%, and 22.6% year-on-year in Asia Pacific. HP saw a 12.1% decline after three consecutive quarters of shipment growth. It recorded double digit shipment declines in all regions, particularly in desk PCs in Asia Pacific and Japan. Dell was the only vendor to escape the downturn, with year-on-year shipment growth rising 2.2%, except in Asia Pacific. It’s the company’s ninth consecutive quarter of shipment growth. Growth was also strong in the Americas where it has a strong presence. The US was also the last country to go into lockdown, and sales were boosted by work at home demand, says Atwal. He also expects businesses to follow cost-constraint strategies for the rest of the year, which will mean spending less on PCs.

Gartner (April 2020) Gartner (April 2020)
As for the channel, he says work from home demand will dictate its strategy for the year ahead, and recommends concentrating on items that are in high demand.

Asked when he expects full production to resume in China, he says it’s ‘nearly there’, and should be up to full speed in April.

 

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