More bad news for the PC industry

By Ajith Ram October 17, 2016

PC shipments have fallen for eight quarters
Smartphones and tablets replace laptops

THE news is not good - again. The embattled PC industry has a real problem.

The analysts at market research firm Gartner say that in the third quarter of this year, PC shipments dropped 5.7 percent year-over-year to roughly 68.9 million units worldwide.

According to the company, PC shipments have been going down now for eight quarters in a row. Gartner describes this as "the longest duration of decline in the history of the PC industry."

PC manufacturers faced many challenges, which included weak back-to-school demand, and ongoing low demand in the consumer market, especially in emerging markets.

Lenovo continued to be the worldwide market leader, but HP is nearly tied for this top spot. Lenovo has recorded six consecutive quarters of year-over-year shipment declines, while the nearest competitors, HP and Dell, have recorded growth since the second quarter of 2016.

Interestingly, Gartner lays the blame for this ongoing decline at the feet of smartphones and tablets. The company claims that many traditional PC users are relying on other devices.

In emerging markets, potential new customers are relying on their smartphones to access the net and they do not require a full-fledged PC.

Asia Pacific PC shipments totalled 24.7 million units in the third quarter of 2016, a 7.6 percent decline from the third quarter of 2016. PC shipments in China are estimated to have declined 4.8 percent.

"The PC is not a high priority device for the majority of consumers, so they do not feel the need to upgrade their PCs as often as they used to. Some may never decide to upgrade to a PC again," says Gartner principal analyst Mikako Kitagawa. "In emerging markets, PC penetration is low, but consumers are not keen to own PCs. Consumers in emerging markets primarily use smartphones or phablets for their computing needs."

The 'great shrinking' of the PC industry could mean that we are entering an era of consolidation. According to The Wall Street Journal, Fujitsu is about to sell its PC arm to Lenovo - just as IBM did years ago.

In the early 2000s, Fujitsu was one of the top 5 PC makers globally. Today, it is a loss-making enterprise that has seen its market eroded by smartphones and tablets.

Fujitsu has been working to offload its non-core businesses and improve profitability. The company spun off its PC division as a separate business in February. This is usually a move that is a precursor to a sale.

Fujitsu was initially hoping for a three-way merger with Vaio (Sony's former PC business, split off in 2014) and Toshiba's PC division. If the sale happens, it would further enhance Lenovo's position as the world's largest PC company. It would also give the Chinese company control of about 40 percent of the Japanese PC market.

More bad news for the PC industry

In a separate report, Gartner pegs Android as accounting for roughly 84.1 percent of all smartphones sold worldwide during the period. This vastly outstrips the 14.8 percent running Apple's iOS.

"Despite the Android platform’s advancements and its dominant market share, the challenges of profitability remain for a number of Android players," stated Gartner research director Roberta Cozza.

"In a slowing smartphone market where large vendors are experiencing growth saturation, emerging brands are disrupting existing brands' long-standing business models to increase their share," said Anshul Gupta, research director at Gartner. "With such changing smartphone market dynamics, Chinese brands are emerging as the new top global brands. Two Chinese brands ranked within the top five worldwide smartphone vendors in the first quarter of 2015 and represented 11 percent of the market. In the first quarter of 2016, there were three Chinese brands – Huawei, Oppo and Xiaomi – and they achieved 17 percent of the market."

According to the second report, Apple had its first double-digit decline year on year, with iPhone sales down 14 percent. Apple's "upgrade program" in the U.S. has helped sweeten its flagship iPhone 6s and 6s plus model pricing to drive sales in its largest smartphone market.

In the first quarter of 2016, Samsung extended its lead over Apple with 23 percent market share. "Samsung's Galaxy S7 series phones and renewed portfolio positioned it as a strong competitor in the smartphone market, and more so in the emerging markets where it has been facing fierce competition from local manufacturers," said Gupta.

At the moment, there are no predictions on how the saga of the exploding Galaxy Note 7 will affect Samsung in the coming quarter.

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