PC market fall shows channel needs to do its homework on inventory management
Times are getting tough again in the PC market. The great resurgence during the Covid era after years of steady decline – when companies bought laptops and PCs for employees working from home – has stopped in its tracks.
At the end of 2022, IDC reported significant declines in shipments over the year for Lenovo (-16.9%), HP (-25.3%), Dell (-16.1%) and Asus (-5.7%). Only Apple reported an increase, up 2.5% on 2021. The ‘others’ category dropped 17.8%.
The rate of decline intensified towards the end of 2022, with big falls in Q4 2020 for Dell (-37.2%), HP (-29%), Lenovo (-28.5%), Asus (-20.9%) and the ‘others’ category (-31%). Apple’s shipments fell by 2.1%.
The slump in shipments continued into the first quarter of 2023. Lenovo and ASUS experienced a 30.3% decline, while Dell fell 31%. The ‘others’ category was down 26%. Apple was the worst affected, plummeting 40.5%.
Apple’s precipitous drop probably benefits from a little bit of perspective when set against its performance as the only vendor to report growth in 2022 and a much smaller fall in shipments in the last quarter of that year compared to its rivals.
Commenting on the first quarter figures, IDC research manager for mobility & consumer device trackers Jitesh Ubrani noted channel inventory was “still well above the healthy four- to six-week range. Even with heavy discounting, channels and PC makers can expect elevated inventory to persist into the middle of the year and potentially into the third quarter”.
That’s not good news for the channel. Excess inventory had already dented average selling prices (ASPs) in the fourth quarter of 2022 and Ubrani warned in January this year that “inventory management of finished PCs as well as components will remain a key issue in the coming quarters and has the potential to further affect ASPs”.
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The prospect of elevated inventory levels continuing into the third quarter is not particularly good news either.
But there was some potentially positive news in the suggestion by IDC that the slowdown in shipments could present an opportunity for the supply chain “to make changes as many factories begin to explore production options outside China”.
Does this mean moving production closer to where PCs are sold? It would be a good idea from an environmental perspective in terms of transport emissions for a start. But will it be close enough to make a difference?
Nevertheless, a hiatus or reduction in PC production while the inventory is being flushed out could also have environmental benefits by reducing the major source of carbon emissions associated with PCs and laptops: the manufacturing process. This typically accounts for 60-70% of emissions, whereas use of the product over its lifetime is responsible for around 20% or so.
So anything that slows down the manufacture of PCs and laptops is, from an environmental perspective, a very good thing. It may also be a good thing from an innovative point of view – and for the customer. If PCs, laptops, tablets and smartphones were upgraded every two years instead of one, they would include chips, components and features that were significant updates over the models they replace, rather than the piecemeal changes that we see in most cases today.
The replacement cycle from a consumer perspective would be extended, meaning more machines and devices kept in commission for longer. It would also mean the IT industry should have a more effective supply chain that is less vulnerable to short term shocks. Not to mention it would be adhering more faithfully to the 3 ‘r’s of reduce, reuse and recycle. Right now, the first ‘r’ tends to be ignored.
It’s a shame that it’s only when there’s a supply issue, economic slowdown or when the other ‘r’ – recession – looms on the horizon that ‘reduce’ gets its due recognition.
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