PC outlook improves as consumer spending stabilizes shipments

FRAMINGHAM, USA: As in the first quarter of 2009, global PC shipments again came in slightly ahead of expectations in the second quarter (2Q09), lessening fears over the extent of the PC market slump.

Worldwide PC shipments (including Desktop and Portable PCs, but excluding x86 Servers) were down 3.1 percent from the second quarter of 2008 –- a notable improvement over an expected decline of 6.3 percent, according to IDC’'s Worldwide Quarterly PC Tracker.

All regions either met or surpassed expectations. Although the global downturn is still making its effects felt in the PC industry, the slump has been mitigated by a PC market which has seen the computing experience evolve to be more personal, portable, and cost-oriented rather than performance-driven. Portable PCs continue to be the primary driver of volume and growth with all regions seeing strong Portable shipments.

"These results are a very positive indicator for the second half of the year," said Loren Loverde, program director for IDC’s Tracker Program. "We are seeing continued demand from consumers and limited impact from supply chain factors such as inventory balancing.

"New product launches in the second half of the year combined with seasonal growth and greater economic confidence resulting from factors such as government stimulus, a more liquid housing market, relatively stable stock market and interest rates, and progress in the auto and financial industries, should support the expected return to growth by year-end."

While the market has outperformed expectations for a second consecutive quarter, the lack of commercial activity remains a drag on growth. The commercial segment remains more conservative with spending, focusing on other priorities and preserving cash. As a result, the segment has not been as motivated by falling prices and new portable designs as the consumer segment.

“Despite continued contraction from a year ago, the US market managed a better-than-average sequential performance –- an indication of a stabilizing or improving market. While the sequential growth may be a hint of recovery, the market’s focus on lower-price PCs and Mini Notebooks is likely to drag the value of the market to lower levels,” says Bob O'Donnell, vice president, Clients and Displays.

“The market continues to rely on consumer purchases, with a substantial weakness in the commercial space. We expect to see more of the same as we enter the busy shopping season of the second half of the year. In the longer term, an expected recovery in the commercial segment should boost growth in 2011.”

Regional Outlook
United States: The US PC market declined by 3 percent year over year in the second quarter, matching forecasts for the market. Ongoing healthy volume through Retail spurred Portables to exceed forecasts, but that was offset by Commercial sluggishness and Desktop volume below expectations. Dell regained its lead by a small margin, but remains hampered by slow commercial spending.

Europe, Middle East, and Africa (EMEA): In line with IDC's forecast, the EMEA PC market continued to contract for the second consecutive quarter. The Portable PC market performed ahead of expectations, maintaining single-digit positive growth, thanks to continued uptake of mini notebooks in the consumer segment and additional momentum generated by the telco channel. But whilst the consumer market held up well, spending in the commercial segment remained constrained across all form factors.

Japan: Shipments declined slower than expected in the second quarter, with year-over-year growth improving notably from the first quarter. Nevertheless, the Japanese market continues to be plagued by tepid Commercial activity and a Consumer market shifting towards lower cost Portables, which has benefited non-Japanese OEMs with a clear focus on Mini Notebook PCs.

Asia/Pacific excluding Japan (APeJ): PC shipments exceeded forecasts, fueled by very strong Portables growth, particularly in Southeast Asia. China was a bright spot in the region, while India came in close to expectations. Shipment growth returned to positive territory after several quarters of declining volume.

Vendor Highlights
HP: It made further inroads into Consumer Portables through the Retail channel and continued to gain share overall. The vendor grew 3.6 percent year over year worldwide with above-market performance in the U.S. The company also performed well in Europe and Asia/Pacific.

Dell: Although still heavily affected by the Commercial slump, Dell saw good growth from consumer-focused SKUs and reclaimed the number 1 spot in the US. The company continues to restructure operations, develop its Consumer business, and should benefit from an eventual rebound in the Commercial segment.

Acer: It continues to capitalize on its growing channel presence to ship Portables geared toward a wide range of cost-conscious consumers. The company maintained its lead in Mini Notebook PCs while its early entry into Atom-based Notebooks should also pay dividends later in the year. The company saw a significant gain in the US market, likely benefiting from the troubles of Dell and Lenovo.

Lenovo: Its renewed focus on Notebooks and emerging regions produced positive growth following declines in the past two quarters. Solid growth was reported in Latin America and APeJ while yearly declines in mature regions slowed compared to 1Q09. Its home court advantage in APeJ also has led it to focus on a myriad of government stimulus programs, which could pay dividends while riding through the Commercial downturn.

Toshiba: It had a solid second quarter where it outgrew the market in most regions and moved up to the fourth spot in the US. Toshiba's Mini Notebook offering has helped it to weather the storm comparatively better than other Japanese OEMs and it was the only major Japanese OEM to have positive yearly growth in Japan.Table Notes:

* Some IDC estimates prior to financial earnings reports.
* Shipments include shipments to distribution channels or end users.
* PCs include Desktop and Portable PCs (including Mini Notebooks)
* PCs do not include x86 Servers or handhelds. Data for all vendors are reported for calendar periods.

PC market to suffer first decline since Dot-Com bubble!

EL SEGUNDO, USA: For the first time since the Dot-Com bust of 2001, the global PC market will suffer a contraction in unit shipments in 2009, due to a combination of falling IT spending and plunging sales of desktop computers, iSuppli Corp. predicts.

Global PC shipments are expected to decline to 287.3 million units in 2009, down 4 percent from 299.2 million in 2008. iSuppli previously forecasted 0.7 percent growth in PC shipments for the year.

“An annual decline in unit shipments is highly unusual in the PC market,” observed Matthew Wilkins, principal analyst, compute platforms for iSuppli. “Even in weak years, PC unit shipments typically rise by single-digit percentages. The last decline—in 2001—was a 5.1 decrease in unit shipments due to the extraordinary impact of the Dot-Com bust, which caused inflated IT spending levels from the previous years to collapse.”

The primary factor driving the decline in the PC market in 2009 is an expected 18.1 percent plunge in desktop shipments. Unit shipments of desktop PCs will amount to 124.4 million in 2009, down from 151.9 million in 2008.

Entry-level servers -- which iSuppli includes in its definition of PCs -- also will suffer a decline, with shipments falling to 6.9 million units, down 9.5 percent from 7.7 million in 2008.

In contrast, notebook PC shipments in 2009 will rise by 11.7 percent to reach 155.97 million units, up from 139.6 million in 2008. Notebook PC shipments will exceed those of desktops on an annual basis for the first time ever in 2009.

“Mobility is winning out in the PC market,” Wilkins said. “Businesses and consumers continue to embrace notebooks PCs because of the benefits of mobility and the near-equal performance and feature set. This is cutting into desktop PC shipments.” Meanwhile, enterprise spending on IT technology is hurting PC sales.

“Tight budgets are putting the squeeze on corporate IT spending,” Wilkins said. “This is hitting desktop and server sales particularly hard.” The figure presents iSuppli’s forecast of global annual PC shipments.

iSuppli Figure: Global PC Shipment Forecast (Thousands of Units)Source: iSuppli, July 2009

Rocky bottom
While iSuppli is currently correlating its data for second-quarter 2009 PC shipments, iSuppli’s forecast for the second quarter calls for flat shipments rising a scant 0.1 percent to reach 66.54 million units, up from 66.45 million in the first quarter.

In the third and fourth quarters, shipments are expected to rise sequentially by 11 and 8.9 percent, respectively.

“Although our expectation is for shipments to rise vigorously in the third quarter on a sequential basis, conditions remain weak compared to 2008.”

Shipments in the third quarter will be down 6.5 percent compared to the same period in 2008.

However, in the fourth quarter, shipments will rise by 3.6 percent compared to a year earlier. This trend will continue in 2010, with shipments rising on a year-over-year basis during every quarter of the year. For all of 2010, global PC shipments will rise by 4.7 percent from 2009.

Consumer portable PCs limit volume decline, but shipment value suffers

FRAMINGHAM, USA: Worldwide PC shipments fell 6.8 percent in the first quarter of 2009 (1Q09), about 1.4 percent better than expected but still the largest decrease since the third quarter of 2001, according to IDC's Worldwide Quarterly PC Tracker.

Although volume declined less than expected thanks to some positive activity in the latter part of the quarter, the Commercial sector and key macroeconomics indicators remain weak.

The growth of Mini Notebook PCs is playing a dramatic role in the market. Mini Notebook PC shipments of 5.7 million in 1Q09 were ahead of expectations, but contributed to a decline of 3.1 million traditional notebooks from a year ago.

The impact on shipment value was dramatic, with Mini Notebook PCs contributing $2.2 billion in the first quarter of 2009 while the value of traditional notebook shipments declined by US$8.4 billion from a year ago. Mini Notebook pricing is expected to rise with more robust models, and shipment growth is expected to slow with the release of low-cost, thin-and-light Intel CULV and AMD Congo-based systems this fall.

However, the growth of Mini Notebooks to 9.5 percent of total PC shipments (17.3 percent of Portables) in 2009 will help drive shipment value down by 17.7 percent even as volumes decline just 3.2 percent.

Mature markets saw growth drop significantly in the past two quarters, but are expected to stabilize and improve going forward. The United States and Western Europe outperformed forecasts as consumer demand was supported by strong ASP declines that were accelerated by growth in Mini Notebook PCs.

Although 1Q09 was promising, shipments in the United States are still expected to decline by just over 2 percent in 2009 and see less than 1 percent growth in 2010. Western Europe saw a limited impact in 4Q08, but saw growth disappear in the first quarter and is likely to see further contraction in 2Q09 before stabilizing –- putting 2009 growth slightly below zero while double-digit growth will not return until 2011.

Projections for Japan were lowered as 1Q09 activity missed expectations, though we continue to expect low-single digit growth in 2010-2011.

Continuing the trend from the fourth quarter of 2008, emerging markets continue to account for the most dramatic shipment declines. Lack of credit along with continued currency devaluation continued a cycle of shrinking resources for channel financing that severely affected Latin America and Central/Eastern Europe.

Canada, along with Latin America and CEMA combined are expecting 2009 to see a decline of more than 13 percent although the region will see double-digit growth in 2010 as it rebounds from 2009.

In contrast to other emerging regions, Asia/Pacific excluding Japan (APeJ) came in slightly above forecast as government spending funneled money to infrastructure improvements and vouchers to stimulate consumer spending. China in particular fared better than hoped. For the rest of 2009 PC growth should accelerate in APeJ, reaching near 12% for 2010, and leading other regions through the end of the forecast.

PC Shipments By Region And Form Factor, 2008-2013* Forecast data
Source: IDC Worldwide Quarterly PC Tracker, June 2009

“The economic crisis continues to dampen PC demand and force changes in the market,” said Loren Loverde, director of IDC’s Worldwide Quarterly PC Tracker. “Mature regions are navigating the changes better than emerging regions in the short-term as finances remain more liquid, but from 2010 forward emerging regions will have the advantage in both growth and volume. Meanwhile, the concentration of growth in the consumer segment and in evolving categories like Mini Notebooks is quickly raising the stakes of competition.”

"Despite a relatively slow first quarter, industry supply chain checks suggest that the worst is over and we are starting to be more optimistic about volume growth at the end of the year and especially into 2010," said Bob O'Donnell, IDC's vice president, Clients and Displays.

"New product introductions coming this fall, including low-cost, thin-and-light consumer portables, low-cost Intel Atom-based all-in-ones, and, of course, Windows 7, should provide a spark that helps to push market towards positive shipment growth over the next 12 months."

PC Shipment Growth By Region And Form Factor, 2008-2013* Forecast data
Source: IDC Worldwide Quarterly PC Tracker, June 2009

Netbook phenomenon will not last

WELLINGBOROUGH, UK: After a surge in 2008, netbook shipments are forecast to grow dramatically in 2009, at a rate of around 140 percent, with a further strong performance predicted for 2010.

However, according to a new report on the World notebook PC market from IMS Research, this strong growth in netbook shipments is forecast to slow dramatically by 2012.

The strong growth in netbook shipments is primary attributed to their low price, coupled with some dramatic improvements in performance and increasing demand for internet access. There has also recently been much stronger promotion of netbooks by the leading brands and by some telecom operators.

However, there are also some factors that restrain netbook market growth, including a small screen and keyboard, simple functionality, limited feature set, and, most importantly, competition from low-priced traditional notebook PCs.

Research Director, Richard Jun Li commented: ”Netbooks are not a revolutionary product that can replace traditional notebook PCs. A netbook is really just a type of notebook PC that meets the needs of entry level computer users, such as students, budget conscious consumers, or those that need to be out of the office or home frequently and require fast and easy access to the internet. These factors all imply that this market sector will mature pretty fast after its early stellar growth”.

Rising notebook PC and TV sales send large-sized LCD panel prices up

EL SEGUNDO, USA: Average pricing for large-sized Thin Film Transistor (TFT) LCD panels is increasing at a stronger-than-expected rate in May due to a rebound in notebook PC demand and surprisingly robust television sales, according to iSuppli Corp.

“While desktop PC monitor panel prices experienced a recovery in February, notebook panel prices continued to decrease throughout the first quarter due to weak demand,” said Sweta Dash, senior director for LCD research at iSuppli.

“However, by May, virtually all large-sized panels -- i.e., those with a diagonal dimension of 10-inches or more—experienced price increases compared to April, including notebook PCs and LCD TVs less than or equal to 37-inches in size. Even the 40/42-inch TV panel prices started to stabilize after months of price reductions.”

Pricing in May is set to increase by $3 to $7 for monitor panels, by $2 to $6 for notebook panels, and by $5 to $8 for 26- and 32-inch television panels.

This trend is expected to continue in June and July with the prices of most panels tracked by iSuppli continuing to increase. Prices will remain on the rise in the third quarter during the holiday build season.

In anticipation of these developments, suppliers have reduced their shipments by drastically cutting utilization rates of their fabs, making panel supply tight and helping to drive up prices as a result.

“China continues to be the key growth region, thanks to the government’s rural subsidy program and the upcoming Golden Week holiday,” Dash said. “Demand from the US market also is intact.”

Among panel suppliers, inventory is reportedly low at about two weeks—the same as it is for panel buyers. Many branded vendors and system integrators are suffering panel shortages for some sizes, although they are seeing improvement from the April level.

With most TV, monitor and notebook panel pricing hovering at the cash-cost level, panel suppliers are trying hard to increase prices in order to make a profit. As a result, pricing for the 26-, 32- and 37-inch TV panels as well as monitor and notebooks panels showed higher-than-expected increases in May.

The figure presents iSuppli’s price estimate for a panel indicative of market trends—the 32-inch WXGA TV LCD panel market for the period of the first quarter of 2007 through the fourth quarter of 2009.Source: iSuppli

Average pricing for these panels is set to rise to $174 in the second quarter, up from $153 in the first. Pricing will increase again to reach $185 in the third quarter.

As iSuppli reported this week, even amid the current economic downturn, consumers are continuing to purchase flat-panel televisions. However, with disposable incomes having been squeezed, U.S. consumers are gravitating to smaller-sized sets. Because of this, sets sized 32-inches and smaller went into short supply starting in April, contributing to a rise in panel prices.