Friday, October 26, 2012

The Global PC Market Experiences a Severe Slump

As predicted, the worldwide PC market has contracted sharply in the third quarter of 2012 (3Q12), with shipments declining 8.6 percent from the third quarter of 2011, according to the latest market study by International Data Corporation (IDC).

That being said, the results are significantly below IDC's earlier forecast of a 3.8 percent year-on-year market contraction.

Continued pressure from other products such as media tablets and smartphones, as well as uncertainty over the impact of Microsoft Windows 8 and the economic outlook, contributed to depressed shipments.

Nevertheless, despite an already conservative outlook, the results show the vulnerability of PCs and the loss of mind-share among buyers who until recent years have flocked to promotions in the third quarter for PCs.

"PCs are going through a severe slump," said Jay Chou, senior research analyst at IDC.

The industry had already weathered a rough second quarter, and now the third quarter was even worse. Questions about PC market saturation and delayed replacement cycles are certainly a factor, but the hard question for PCs still remains unanswered.

While ultrabook prices have come down a little, there are still some significant challenges that will greet Windows 8 in the coming quarter. On this backdrop, will the Windows ecosystem recover from this latest setback?

Regional Market Outlook

United States – The U.S. market came in slightly weaker than an already negative forecast, contracting 12.4 percent compared to a forecast of –9.5 percent. This reflected weaker consumer demand, including a weak back-to-school season, and an industry-wide inventory clean up. The consumer segment was particularly affected as buyers focused on competing products (i.e. tablets/smartphones).

Demand in the commercial sector was subdued by weaknesses and uncertainty in the broad global economy amid a heated presidential election season. However, IDC believes that the fundamentals for some recovery exist. With the launch of Windows 8 in 4Q12, they expect shipment growth may return to mid-single digits in the fourth quarter and into next year.

EMEA – The EMEA market remained constrained as expected in the third quarter. July and August saw low sell-in levels as vendors focused on ensuring leaner inventory levels after a strong 2Q12, while September sell-in was boosted, as anticipated, by the production of new Windows 8 systems and an attractive ultrabook and ultra slim line up set to hit the shelves end October.

Continued economic pressure in the business space and competition from other devices for consumers, however, combined to keep the supply chain and buyers cautious.

Japan – Japan was one of the stronger markets, benefitting from rebuilding efforts. Unfortunately, this strength was only relative to other markets – achieved with shipments still falling short of flat from a year ago.

Asia-Pacific (excluding Japan) – The region continued to contract on a year-on-year basis, though growing sequentially from 2Q12. China was mostly on target but the rest of the region came in below expectations as ongoing economic sluggishness and competing device distractions weighed on PC spending this quarter.

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