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In the wake of Intel announcing a $900 million cut in first-quarter revenue projections due to softening demand for corporate PCs, IDC analysts now are saying that the number of PC shipments will fall more than expected this year.
The analyst firm is saying that global PC shipments will fall by 4.9 percent this year compared with 2013, a drop from an earlier prediction of a 3.3 percent decrease. While IDC analysts said they are slightly raising their projections for 2016 and 2017, the PC market will continue to be challenged—particularly in emerging markets—by the growing popularity of mobile devices, particularly smartphones.
The industry has continued to show strength in mature markets, such as North America, but emerging markets—including many regions where their first computing device has been a smartphone—will be difficult to turn around, according to Loren Loverde, vice president of IDC’s Worldwide PC Trackers unit.
“The gains in mature regions for 2014 helped stabilize the market, but any opportunity for long-term growth depends on reviving growth in emerging regions, and that seems unlikely with the shift toward mobile devices,” Loverde said in a statement, adding that including two-in-one systems into the PC mix would only increase the PC shipment rate through 2019 from a 1.1 percent drop to a 0.5 percent increase. “Vendors can focus on growth segments of the PC market such as [all-in-ones], slim and convertible PCs, or consolidate share, but pressure on pricing and from competing devices will continue to make it a challenging market.”
Intel saw record revenues in 2014, helped partly by a resurgence in its PC business. However, company officials surprised the industry March 12 when they announced they were cutting their revenue guidance for the first quarter from $13.7 billion to $12.8 billion, putting much of the blame on slowing demand in the commercial PC space. They noted that small and midsize businesses were not migrating away from Microsoft’s aged Windows XP operating system as quickly as they expected.
It was Microsoft’s decision to end support for Windows XP in April 2014 that helped stabilize a PC market that had seen significant declines in sales since 2011, due in large part to the popularity of tablets. The Windows XP issue drove enterprises, in particular, to refresh their aging fleet of PCs, though Intel CEO Brian Krzanich also credited dropping prices and new form factors—like two-in-ones—for helping re-spark interest in PCs.
In the second half of 2014, the industry also was helped by a build-up in inventory in anticipation of Microsoft reducing the subsidies it was paying as part of its Windows 8.1 + Bing program, designed to encourage adoption of the operating system. The result is that the consumer channel still needs to clear out the inventory that it had built up. The scaling back of the subsidies also probably will result in system prices rising, the analysts said.
IDC: PC Shipments Will Slow More Than Expected in 2015
In addition, with such technologies as Intel’s Skylake processor platform and Microsoft’s Windows 10 OS on the horizon for the second half of the year, OEMs and PC buyers will be holding off on some of their purchases until those products are available.
An upside for PC makers is that tablet sales continue to slow, according to Jay Chou, senior research analyst for IDC’s Worldwide PC Trackers. IDC noted that in the fourth quarter of 2014, for the first time, year-over-year shipments of tablets declined, and the firm said it was scaling back its five-year forecast. The analysts expect worldwide tablet shipments in 2015 to hit 234.5 million units, a 2.1 percent increase over last year, and growth will continue over the next several years as commercial interest in tablets increase and Microsoft continues gaining traction in the market.
For PCs, IDC expects 293.1 million PCs will ship in 2015, dropping to 291.4 million in 2019, with the market shrinking from $201 billion last year to $175 billion by 2019.
The trends outlined by IDC echo what Bob O’Donnell, principal analyst with TECHnalysis Research, is finding. However, while acknowledging the continued popularity of smartphones, O’Donnell said that people will still turn to PCs when they need to do work and create content rather than simply surf the Web and consume content.
“A smartphone is great, but it has a 4-inch screen or a 5-inch screen,” he told eWEEK. “It doesn’t have a 14-inch screen.”
O’Donnell said he still sees a relatively healthy future for the PC market, despite the challenge from mobile devices and the fact that businesses are holding onto their systems longer than before. A high percentage of the PC market revolves around PC refreshes, and with more than 1 billion PCs in use today, the future still looks positive.