PC makers, jilted of late by consumers attracted to tablets and smartphones, are pinning their hopes for a change in fortunes on the October launch of the Windows 8 operating system, announced last week.
But industry executives and analysts warn that the chill of a slowing global economy could quash those hopes. Unlike in previous downturns, such as in the aftermath of the 2008 financial crisis, consumer demand for new electronic gadgets appears to no longer be decoupled from the state of the broader economy.
Worldwide PC shipments fell to 87.5m units in the second quarter, according to preliminary figures released by the research firm Gartner last week. The 0.1 per cent decline on a year earlier represented the seventh consecutive quarter of virtually flat to single-digit growth.
Acer, the world’s third-largest computer vendor by unit shipments, had previously forecast 10 per cent annual growth in the number of computers it ships. That has now been trimmed to zero to 5 per cent growth, according to a company source.
“Uncertainties in the economy in various regions, as well as consumer’s low interest in PC purchases, were some of the key influences, said Mikako Kitagawa, analyst at Gartner.
During the key holiday sales seasons in the second half, PC makers such as HP , Dell and Lenovo will also see competition from Microsoft and Google , both of which have recently launched their own tablet PCs. Apple is also expected to unveil the iPhone 5 in October.
Kirk Yang, head of Asia ex-Japan tech hardware research at Barclays, says PC makers’ ability to excite consumers will be key to their success at a time when cutbacks in corporate and government budgets have also been hurting PC sales.
Consumers “don’t have to buy – I’m sure everybody’s PC still works today, everybody’s mobile phone still works today – but they rush out to buy an iPhone 5 or Samsung Galaxy because it’s something exciting,” said Mr Yang.
So far, it appears that the supply chain is not betting on that happening. For the third quarter, the Taiwanese companies that manufacture more than 90 per cent of the world’s notebook PCs are forecasting an average of 7 per cent quarter-on-quarter unit growth, far below their historic average of 21 per cent growth, says Jenny Lai, an analyst with HSBC.
Economists with HSBC expect overall Asian electronics production will grow just 1.5 per cent in August, below the three-year average of 3.7 per cent growth.
Asian PC brands are still faring better than their US counterparts. HP lost two percentage points of global market share on a year earlier, falling to 14.9 per cent in the second quarter, while China’s Lenovo gained two to become a close second with 14.7 per cent. Dell dropped to fourth as it was overtaken by Taiwan’s Acer, whose compatriot Asus closed in fifth with near-40 per cent growth in market share.
HP has been restructuring after reversing a plan to spin off its PC business, while Dell has been focusing more on software and services, but both are responding to long-term, low-margin problems and the eastward shift of the PC business, according to Ms Kitagawa.
“It’s very difficult for HP and Dell to compete with Asian companies now, Lenovo can live with much lower margins than they can,” she told the Financial Times.
Nevertheless, the entire market needs catalysts for growth and the news from Microsoft that PCs featuring Windows 8 would be able to go on sale in October could provide a boost in the fourth quarter, although some analysts remain pessimistic.
“People are not bracing for a strong second half,” says William Dong, head of Taiwan securities for UBS. “There’s a chance only if we start to look to the 2013 outlook, and there’s a lot of ifs and buts about that.”
HSBC’s Ms Lai points out that sales data from prior launches of new Windows versions show no evidence that buyers had postponed their purchases until after the launches. Christine Wang, an analyst with Daiwa, points out that Windows 8 is designed mostly for tablets and might have a limited impact on PC notebook sales.
Most PC makers are now competing in the tablet market – Asus makes the Nexus 7, a first tablet from Google going on sale this month. They are also investing in Ultrabooks – thin and light laptops being given a huge marketing push by Intel.
But analysts say Ultrabooks are still priced too high, at around $800, to become of mass consumer interest and only a handful of models of a new hybrid category, which combines a laptop with a tablet, has so far appeared.
Suppliers to PC makers are also suffering. The microprocessor maker AMD warned on Monday that its second-quarter revenues would be down about 11 per cent on the first quarter, after previously predicting a 3 per cent rise. It blamed softer sales late in the quarter in China and Europe, along with a weaker consumer buying environment for PC makers.
The one certain spot for now in the changing tech landscape remains Apple. Robert Lea, a semiconductor analyst with Jefferies, says that orders for chips for assembling Apple products are the only “bright spot” in an otherwise weak second half.
“With Apple, there's more confidence on the sales. PC, no one knows. It’s a big question,” one Taipei-based analyst said.