IoT news dominates the headlines, as do the market movements of smartphones and the question of smart device saturation in mature markets. Creeping more and more into industry news is the PC forecast, which, until recently, had been relegated to the negative news pile. Although much discussion has been tossed around regarding tablet cannibalization of the traditional PC market, laptops, notebooks, and desktops for enterprise use are not being displaced; their cycles have changed (see this Smith MarketWatch Quarterly report on early positive disruptions by smart devices).
New PC cycles reveal themselves
The latest data from the first half of the year (1H14) are certainly supporting the permanency of traditional PCs in the wider consumer and enterprise markets. Although PCs are nowhere near the top device sellers, what we do see is that rather than cannibalizing PCs, tablets have pushed refresh cycles farther out, much as smartphones have pushed out tablet refresh cycles, as summarized by IDC. The recent industry data underscore the stabilizing events for traditional PC markets:
Global PC shipments fell only 1.7% Y/Y in Q2 to 74.4M, says IDC. That's much better than the firm's forecast for a 7.1% drop, and smaller than the 4.4% and 5.6% declines respectively seen in Q1 and Q4. Gartner is even more positive, estimating shipments rose 0.1%, [original emphasis] thus ending a long string of declines.
One of the key contributors to the slowing in what has been a steady decline in PC shipments was the announcement by Microsoft of the end of Windows XP support. Much as once-traditional cycles followed Microsoft version announcements, the pent up demand for enterprise PC sales was finally triggered, many cycles tardy, because of the required shift away from Windows XP now. As IDC clearly warns on placing too much hope in the revival of PCs beyond longer refresh cycles:
[…] an important part of this strength is driven by the rebound from weaker demand last year and to potentially short-term replacement activity. We can look for some recovery in emerging regions going forward, but it may coincide with slower growth in mature regions. We do not see the recent gains as a motive to raise the long-term outlook although 2014 growth could get closer to flat, rather than the May projection of -6%.
Low-end priced devices continue to gain globally
As discussed in many of the recent forecasts for the semiconductor and electronics industry, the Internet of Things (IoT) and smartphone penetration into new markets are critical growth elements globally. The caveat with this growth is that it is focusing on lower-priced devices (smartphone and/or tablet) globally for new device owners, rather than a refresh of high-end devices for the developed market consumers. The IDC data found similar market movement showing strong low-end PC system shipments worldwide:
One encouraging factor was a good intake of lower-end systems, including Chromebooks, which coincides with the recent slowing in tablet growth and perhaps signals the beginning of some stabilization on the consumer side […].
One PC example of this lower-priced/tiered device strength is seen in Dell's recent Chromebook 11 which has sold out and is currently only available to educational and commercial customers. The under US $200, reduced-feature, Chomebooks are entering a high-sales cycle with Fall's return to school period. As PCWorld notes, the unavailability of Dell's Chromebooks presents a risky market position:
Dell's decision comes as Chromebook shipments rise and competitors launch new models. Chromebooks accounted for 35 percent of all U.S. commercial laptop shipments to date in 2014, jumping more than 250 percent compared to the same period last year. Chromebooks accounted for 5 percent to 6 percent of overall consumer laptop sales in the period, and that number will continue to rise, said Stephen Baker, vice president of industry analysis at NPD.
Further support of the market strength forecasted for the lower-end PC market was expressed in Intel's 2H14 forecast which came out after market close Tuesday. During the call, as summarized by FT, Intel was positive and bullish on market opportunities and its ability to see revenue growth:
[Intel] Executives also say they are looking for a boost from the weaker consumer market. New and cheaper PCs will be launched before this year's holiday season, including some cheaper convertible tablet PCs.
“We think that those will . . . drive excitement in the market,” said Stacy Smith, chief financial officer.