PC market slowing down but not crashing amid crisis

MANILA, Philippines – The PCs are hanging on marginally better than other products as the global recession mercilessly tears into every industry, including the hi-tech sector.

Although latest market figures released by IDC show worldwide PC shipments tumbling down to eight percent or more in the first half of 2009, the research firm has noted several reasons why the PC market will not fare dramatically worse in the current environment than it did in the 2001 recession – even if the current economic environment is notably worse.

Because PCs are far more important and affordable today than they were in previous economic crises, IDC believes consumers will not shun from buying them this year. A PC today costs half what it did in 2000 at the beginning of the last recession, and prices continue to drop aggressively, helping cultivate demand so that the PC industry doesn’t have to go the way of the financial or auto industries.

IDC also noted how the PC market is more driven by replacements than it used to be, especially when it comes to portable or notebook PCs, which typically have a shorter lifespan than desktops. In fact, portables are expected to outgrow desktop PC and x86 server shipments this year. Portables PCs’ contribution to the overall PC market has risen dramatically from less than 20 percent in 2000 to 50 percent in 2008, IDC data show.

Notebook PCs also proved to be the lifesaver for PC vendors in the Asia-Pacific region (excluding Japan). For this PC segment, IDC’s preliminary data show the market down by five percent sequentially and five percent year-on-year in 1Q09.

But total shipments came in close to forecasts, as portable PCs in key markets such as China, Hong Kong, and Taiwan were strong, lifting this segment to a 12-percent year-on-year growth.

“Even though the quarter was soft, it was somewhat relieving to see that the region’s market was able to hold up to forecasts this quarter, especially compared to a dismal fourth quarter of 2008,” said Bryan Ma, IDC director for Asia-Pacific Personal Systems Research.

“That does not mean that we are out of the woods yet though. The economy is still showing mixed signals, and recent political instability in markets like Thailand created further uncertainty. Commercial buying is thus still likely to remain questionable this year, but hopefully consumer portables can help offset that,” Ma said.

IDC finds Lenovo leading the market during the first quarter of 2009 with 16.9 percent market share, while HP was one of the few vendors to post a year-on-year gain in the midst of difficult economic conditions with 16.1 percent share.

When asked for comment, the local office of Lenovo didn’t give any statement as to how the last four months have been for them. HP Philippines, on the other hand, declined to provide any figures or information, saying that they are in a “quiet period.”

Acer ranked No. 4 during the first quarter of 2009 with market share of 7.4 percent compared to 7.5 in the 4Q08. Its local office also reported that the first quarter “is Acer Philippines’ (sales) record high,” said Agnes Espino, sales director at Acer Philippines. “We are assessing the second quarter to be good (for Acer) as well. We are hoping for continuous good sales,” she added.

Netbooks

During these trying times, the PC market also has found a little savior in what is called the netbook. In Hong Kong, one of the few countries with a strong PC market performance in the first quarter of 2009, sales of netbooks were a key driver, said Kathy Sin, IDC research manager of Asia-Pacific Personal Systems Research.

Netbooks have been the fastest moving items in PC stores for nearly two years now, and despite the recession, sales forecasts for these little PC wonders remained positive. Market researcher iSuppli Corp. expects netbooks’ worldwide shipments to grow by 68.5 percent this year. Research firm Gartner, on the other hand, estimates global shipments of netbooks to increase by 50 percent to 7.8 million units this year, even as overall computer sales would likely decline.

Some analysts point out, however, that the netbooks’ phenomenal sales come at the expense of standard PC notebooks and desktops. They say that once the economy improves, people will go back buying the netbooks’ more powerful and more equipped brethren and, ergo, will end netbooks’ extraordinary growth rates.

“People are not buying netbooks because they are truly desirable platforms, but rather because as low-cost PCs, they offer a good mix of features at an acceptable price point,” Matthew Wilkins, iSuppli principal analyst for computer platforms, said in a statement. “With financial motivation a key factor in many netbook sales, growth of the netbook platform is likely to slow down when the economy comes back and consumers have more money in their pockets.”

Global shipment growth for netbook PCs, according to iSuppli, will decelerate to less astounding but still impressive 39.6 percent in 2010, and will continue to slow to reach 13.1 percent in 2013.

Meanwhile, the recession and relentless competition seem to be testing the company that gave the world its first netbook. Taiwan-based Asustek Computer Inc. recently reported that its profit fell 94 percent to $13.7 million during the first quarter after posting a loss in the fourth quarter. Its quarterly sales fell 27 percent.

Asus’ Philippine operations painted the same bleak picture for the first quarter. Jason Sy Teh, Philippine marketing deputy manager of Asus Technology Pte Ltd., admitted to NetWorks that “Asus status has not been so good. Our market share dropped significantly and being battered by Acer and HP.” He, however, quickly gave reassurance that Asus “will survive these tough times.”

Asus, in late 2007, introduced its first stripped-down laptop called the Eee PC netbook at less than $250. With 6.1 million units of Eee PC units sold to date, Asustek now ranks fifth among notebook manufacturers and has also attracted rivalries from the known PC giants.

But the dizzying speed by which it launched new versions of Eee PC last year in an effort to add or correct some features and stay ahead of competition somewhat confused consumers. Asustek founder and chairman Jonney Shih, however, vowed that they won’t repeat such mistakes and will only release three new Eee PC versions this year as well as new products that include a low-cost computer running Google’s Android operating system.

Reality bites

Despite the PC industry’s display of resilience, hard data still show that worldwide PC shipments fell 1.9 percent in the fourth quarter of 2008 following five years of almost uninterrupted double-digit growth. PC shipments are expected to gradually improve to a small positive growth in the fourth quarter, according to IDC’s Worldwide Quarterly PC Tracker.

IDC explained though that the dramatic declines in component shipments are mainly due to clearing of inventory, particularly because the crisis hit in the fourth quarter when inventory was at its peak. As such, the 11-percent drop in PC processor shipments during the fourth quarter should be more substantial than the impact to actual PC shipments will be over several quarters.

• Forecast data

Source: IDC Worldwide Quarterly PC Tracker, March 2009

Note: PCs include Desktop, Notebook, Ultra portable, and x86 server and do not include handhelds.

IDC’s Worldwide Quarterly PC Tracker gathers PC market data in 55 countries by vendor, form factor, brand, processor brand and speed, sales channel and user segment. The research includes historical and forecast trend analysis as well as price band and installed base data.

Source: IDC, April 2009

 Alma Buelva, Philippine Star