We thought the bottom had been reached … but, PC shipments are down by a surprising amount in the first quarter.
After the collapse of 2008-09, it took about two years for the seasonality cycle of the PC market to stabilize, and offer some measure of predictability, although it will never come back to the way it was 10 years ago. The first quarter is usually flat to down, although we’ve even seen an occasion or two where it went up. This year it’s down, way down, and that’s pretty shocking and scary.
Macro-economic events are a major contributor. PC shipments aren’t the only industry to see a down first quarter. Automobile sales were down (3.3%) even in the face of crazy low gasoline prices. Retail sales are down. Uncertainty in Europe is translating to caution from consumers.
PC sales dropped more outside the US (almost 2X), which reflects the economic improvement in the US economy where unemployment levels have dropped to or below 5% and the Consumer Price Index for All Urban Consumers declined 0.2 largely due to the price of gasoline.
The net result was worldwide shipments of PCs dropped in Q1’16 compared with last year, but more disturbing is that it is the sixth consecutive quarter of declines and the first time since 2007 that shipments dropped t 64.8 million units according to research firm Gartner, and as low as 60.6 million according to IDC.
The average change in PC shipments worldwide, based on IDC and Gartner data indicates a -4.3% CAGR over 7 years as shown in the accompanying chart.
Separately, IDC said PC shipments in the first quarter fell 11.5% globally and 5.8% in the U.S, and Gartner said it was -9.6% worldwide and -6.6% in the U.S.
What do we think?
Quite frankly we were surprised by the drop. We expected (and forecasted) Q1 to be flat to down maybe 1-2%. However, the PC isn’t alone, Digitimes Research estimates that 46.7 million tablets will be shipped in the first quarter of 2016. That would constitute a 28.6% decline from last quarter and an 8.6% year-on-year slowdown. And Gartner said global smartphone sales will for the first time exhibit single-digit growth in 2016 with a 7 per cent growth from 2015. So it isn’t that mobile devices are cannibalizing PC shipments but rather that there is a decline in consumer and business consumption of personal computing devices in general worldwide. No doubt the malaise in China is having a big effect, the stuttering economy in Japan isn’t helping and Europe is struggling with its economy while dealing with an immigration problem. The world is busy right now and simply not out buying stuff.
We’re sticking with our forecast that as the economy turns the PC industry will follow that and show gains, perhaps no more than GDP growth, but growth nonetheless. There is a solid base of PC users who simply can’t do their work on any other device and they are not only not going away, they are increasing as the work force and workloads increase.