The new normal for OEMs is a return to harsh truths
It’s strange to think that while so many of us were having such an enforced quiet time of it during the pandemic lockdowns, the PC industry was in overdrive. Of course, Covid set specific conditions that were favourable to the increased sales of personal computers, particularly laptops and notebooks.
The huge rise in working from home that accompanied the lockdown as people were unable to return to their offices and workplaces, caused a spectacular surge in orders for personal computers from many businesses and organisations seeking to accommodate a return to trading as soon as possible.
The change in working patterns forced many companies that already provided computers in the work place to buy more machines for their employees to use at home.
Lockdown’s effects on production and manufacturing facilities exacerbated the effects of this unexpected increase in demand on supply chains and the channel.
Now that we are returning to some form of normality – or as normal as we can expect in the current climate – the PC market is also experiencing a correction. Major vendors are posting big falls in their PC shipments as the market readjusts.
The slow long-term decline in PC sales, which was so unexpectedly disrupted by the pandemic, appears likely to return.
Recent figures from IDC reveal that global PC shipments fell 13.4% in the second quarter, the sixth consecutive decline, even if “the market performed better than forecast for the quarter”.
The difficulty this represents for the channel and vendors is, unsurprisingly, inventory. There’s too much of it. As IDC notes, weak demand “has caused inventory levels to remain above normal for longer than expected. This includes finished systems at the channel level, as well as the supply chain”.
The knock-on effect is also felt in terms of margins. The requirement to clear excess inventory usually results in lower prices and reduced profits or lower sales. Guess who is on the frontline of that?
Jitesh Ubrani, research manager for IDC’s Mobility and Consumer Device Trackers, says that “elevated channel and component inventory are once again dragging down the market”. While those issues are slowly easing, no one is in a hurry to take any chances on a possible recovery. Component suppliers are offering reduced pricing to try and clear their inventory but “PC makers and channels are still cautious about new systems due to the reduced demand”.
Who can blame them?
After an unprecedented – and entirely unforeseen – period of sales growth, it would take a very brave soul to bet the market will sustain similar levels of sales once the current excess has been flushed through the system.
Ryan Reith, group vice president for IDC’s client device trackers, says the PC industry has faced an “extremely challenging” rollercoaster of supply and demand over the past five years. “Companies don’t want to be caught with short supply like they were in 2020 and 2021,” he adds, “but at the same time, many seem hesitant to make the big bet on a market rebound.”
This is not news that should shatter anyone’s earth. Whatever ‘rebound’ there may be, it’s not going to be the same as it was for a once in generation event (fingers crossed) like a global pandemic.
Offices are unlikely to regain full occupancy. Many people will continue to work from home for a significant part of their working week. There seems little scope for profound, rapid disruptive change to match that wrought by the pandemic – and its effects on the PC market.
While that’s not fantastic news for the PC industry, the consolation we can take, considering what caused it to do so well the last time, is that it might be better news for the rest of us. Would anyone be very upset if a return to normality overall meant lower growth – or a gradual decline – in the PC industry?
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