Worldwide PC shipments decline 4.3% in 2Q17: Gartner

By Digital News Asia July 24, 2017

Shipments in 2Q17 were the lowest quarter volume since 2007
Worldwide IT spending is projected to total US$3.5 trillion in 2017

Worldwide PC shipments decline 4.3% in 2Q17: Gartner

WORLDWIDE PC shipments totalled 61.1 million units in the second quarter of 2017, a 4.3% decline from the second quarter of 2016, according to preliminary results by Gartner, Inc.

The PC industry is in the midst of a five-year slump, and this is the 11th straight quarter of declining shipments. Shipments in the second quarter of this year were the lowest quarter volume since 2007.

“Higher PC prices due to the impact of component shortages for DRAM, solid state drives (SSDs) and LCD panels had a pronounced negative impact on PC demand in the second quarter of 2017,” said Gartner principal analyst Mikako Kitagawa.

“The approach to higher component costs varied by vendor. Some decided to absorb the component price hike without raising the final price of their devices, while other vendors transferred the costs to the end-user price.”

However, in the business segment, vendors could not increase the price too quickly, especially in large enterprises where the price is typically locked in based on the contract, which often run through the quarter or even the year,” Kitagawa said.

“In the consumer market, the price hike has a greater impact as buying habits are more sensitive to price increases. Many consumers are willing to postpone their purchases until the price pressure eases.”

HP Inc reclaimed the top position from Lenovo in the worldwide PC market in the second quarter of 2017 (see Table 1). HP Inc has achieved five consecutive quarters of year-over-year growth. Shipments grew in most regions, and it did especially well in the US market where its shipments growth far exceeded the regional average.

Worldwide PC shipments decline 4.3% in 2Q17: Gartner

Lenovo’s global shipments declined 8.4% in the second quarter of 2017, after two quarters of growth. Lenovo recorded year-over-year shipment declines in all key regions.

Kitagawa said the 2Q17 results could reflect Lenovo’s strategic shift from unit share gains to margin protection. The strategic balance between share gain and profitability is a challenge for all PC vendors.

Dell achieved five consecutive quarters of year-on-year global shipment growth, as shipments increased 1.4% in 2Q17. Dell has put a high priority on PCs as a strategic business. Among the top three vendors, Dell is the only vendor which can supply the integrated IT needs to businesses under the Dell Technologies umbrella of companies.

The Chromebook market has been growing much faster than the overall PC market. Gartner does not include Chromebook shipments within the overall PC market, but it is moderately impacting the PC market. Worldwide Chromebook shipments grew 38% in 2016, while the overall PC market declined 6%.

“The Chromebook is not a PC replacement as of now, but it could be potentially transformed as a PC replacement if a few conditions are met going forward,” Kitagawa said.

“For example, infrastructure of general connectivity needs to improve; mobile data connectivity needs to become more affordable; and it needs to have more offline capability.”

Asia/Pacific market dynamics

In Asia/Pacific, PC shipments surpassed 21.5 million units in the second quarter of 2017, down 5.1% from the same period last year. The PC market in this region was primarily affected by market dynamics in India and China.

In India, the pent-up demand after the demonetisation cooled down after the first quarter, coupled with the absence of a large tender deal compared to a year ago and higher PC prices, brought about weak market growth.

The China market was hugely impacted by the rise in PC prices due to the component shortage that started in late 2016. 2Q17 saw inventory (especially in the consumer channel) brought over from the previous quarter. Further PC price adjustments had to be made to react to the component shortage in the quarter.

The deterioration of the yuan against the US dollar added to the challenge for foreign brands. Price hikes resulted in the postponement of PC purchases, especially by large accounts, impacting new shipments for the quarter overall. In mature markets, growth continued to be stable, driven by PC refresh.

Worldwide IT spending

Worldwide IT spending is projected to total US$3.5 trillion in 2017, a 2.4% increase from 2016, according to Gartner. This growth rate is up from the previous quarter's forecast of 1.4%, due to the US dollar decline against many foreign currencies.

"Digital business is having a profound effect on the way business is done and how it is supported," said John-David Lovelock, vice president and distinguished analyst at Gartner.

"The impact of digital business is giving rise to new categories; for example, the convergence of "software plus services plus intellectual property."

These next-generation offerings are fuelled by business and technology platforms that will be the driver for new categories of spending. Industry-specific disruptive technologies include the Internet of Things (IoT) in manufacturing, blockchain in financial services (and other industries), and smart machines in retail. The focus is on how technology is disrupting and enabling business."

The worldwide enterprise software market is forecast to grow 7.6% in 2017, up from 5.3% growth in 2016. As software applications allow more organisations to derive revenue from digital business channels, there will be a stronger need to automate and release new applications and functionality.

Worldwide PC shipments decline 4.3% in 2Q17: Gartner

"With the increased adoption of SaaS-based enterprise applications, there also comes an increase in acceptance of IT operations management (ITOM) tools that are also delivered from the cloud," said Lovelock.

"These cloud-based tools allow infrastructure and operations (I&O) organisations to more rapidly add functionality and adopt newer technologies to help them manage faster application release cycles. If the I&O team does not monitor and track the rapidly changing environment, it risks infrastructure and application service degradation, which ultimately impacts the end-user experience and can have financial as well as brand repercussions."

IT spending increased in 2016, but only two of the top 10 IT vendors posted organic revenue growth. With revenue sources still tied to the Nexus of Forces (the convergence of social, mobility, cloud and information), some of the top 10 vendors will fare better in 2017 due to strength in mobile phone sales.

Worldwide spending on devices (PCs, tablets, ultramobiles and mobile phones) is projected to grow 3.8% in 2017, to reach US$654 billion.

This is up from the previous quarter's forecast of 1.7%. Mobile phone growth will be driven by increased average selling prices (ASPs) for premium phones in mature markets due to the 10th anniversary of the iPhone and the increased mix of basic phones over utility phones.

However, the tablet market continues to decline, as replacement cycles remain extended.