Demand plummets, costs surge, and the PC industry enters winter again
The global PC market has been on a roll for seven consecutive quarters, maintaining positive growth, but by 2022, this trend will come to an abrupt end.
According to Canalys data, in the first quarter of 2022, shipments of PCs (including desktops, laptops and workstations) in the Chinese market were about 11.7 million units, down 1% year-on-year. Global sales were even less optimistic than the Chinese market, with a year-on-year decline of 5.1%, with total sales of 80.5 million units.
In the second quarter, the pace of year-on-year decline was still unstoppable. Although the total shipment of 19.4 million units increased by 13% month-on-month, it was still down by 3% compared to the same period last year. From the perspective of the global market, the evaluation given by the analysis agency Canalys is-"significant damage", and total shipments plummeted by 15%, which is the lowest level since the first quarter of 2020.
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PC equipment shipments and changes | Source: Canalys
Brands are not good either. In the second quarter of this year, the top five brands were all in decline. According to Canalys data, HP's annual growth rate was -27.5%, and Lenovo, Dell, Acer, and Asus all showed varying degrees of decline.
In Lenovo's latest fiscal 2022/23 fiscal first quarter performance report, the smart device business group, which includes personal computers, tablets, smartphones and other smart devices, saw revenue drop 3% in the quarter, while Non-PC sales actually grew 12% year over year. The chairman and CEO of Lenovo Group emphasized in today's financial performance statement that its business turnover other than personal computers accounted for the highest level in the group's overall history. The implication is that Lenovo is not dependent on PC growth.
Even Apple Computer didn't sell well in the second quarter. According to its financial report for the third fiscal quarter of 2022 (the second quarter of the natural year 2022), Mac revenue was $7.382 billion, down 10.35% year-on-year.
The product cannot be sold, and the pressure on the brand can be imagined. In April of this year, it was reported that almost all leading PC manufacturers are "cutting orders", and Lenovo, HP, Acer, Asus, etc. have all begun to lower their annual shipment targets. In the third quarter, Dell has been exposed that the demand for monitors and notebook panels will be reduced by 50%, which almost means that this old PC manufacturer has cut half of its business lines.
Is the sudden cold winter just a short-term cold wind, or does it indicate that PC products are gradually being replaced in the minds of consumers?
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A hundred days without flowers
"One day may not be able to sell a laptop," an Asus dealer in Shanghai said in an interview with the media in July this year: "The gross profit of a laptop is 50 yuan to 200 yuan, if you include the rent, Operating costs such as personnel and after-sales service are almost unprofitable.”
Faced with this situation, many people believe that the prosperity of online channels has squeezed the space of offline channels. However, according to Chen Shuxin, senior research manager of IDC China, in the first quarter of 2022, online channels in the notebook market (including manufacturers' official websites and third-party e-commerce platforms) accounted for 58.11% of the overall notebook market. It will increase, but the growth rate will slow down." It can be seen that offline channels are still important, and if you can't make money, the loss to the brand will still be heavy.
What's more, online channels will start to subsidize as soon as the big promotion comes, and brands are also competing on price. Although sales can be boosted in the short term, there is still a question mark on how much the brand can benefit. This year's 618, Xiaomi, Huawei and other brands have discounts ranging from 300 yuan to 500 yuan. Competitive discounts can also reflect the brand's sales anxiety from the side.
Why are PCs suddenly unsold?
There are many reasons. First of all, from the perspective of consumption, the weak consumption caused by the weak global economy has brought a significant impact on the consumption of electronic products. In addition, PC equipment is already a consumable item, the replacement cycle is long, and the service group is limited, and the non-productive people who just need it will not choose to replace the equipment during the period of high consumption pressure unless it is a last resort.
The retreat of the epidemic dividend is also an important reason for the weak sales of PC products. Looking back at the epidemic in the past few years, the strong demand for home office and learning due to isolation has promoted the sales of PC products. According to Canalys data, China's PC market will perform strongly in 2021, with shipments reaching a record 57 million units, a year-on-year increase of 10%.
Large PC manufacturers have also benefited from the epidemic. Lenovo's annual growth rate of shipments in 2021 is as high as 21.5%, and Acer has handed over an annual growth rate of 36.4%.
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PC product shipments of various brands in the Chinese market in 2021
Source: Canalys
Going back one year in time, the PC shipments in the Chinese market were 49.1 million units, a year-on-year increase of 1.7%. Although the data increase is not obvious, it is the first time in the past nine years that China's computer sales have increased. According to data from the US data company IDC, starting from the second quarter of 2020, China's computer shipments have maintained a 10% growth for three consecutive quarters. Online education, games, and corporate office purchases propped up the sales of computers that year.
It is no coincidence that the industry data and the social epidemic control situation have formed a certain degree of fit. In June this year, at the shareholders meeting held by Acer Group, Chairman Chen Junsheng made it clear: "The PC market has reversed, showing a trend of oversupply."
Chen Junsheng said in an interview that Acer's inventory turnover days have been extended from 7.8 weeks before the epidemic to 8 weeks now. Enterprises have already begun to prepare for the second half of the year, and Acer's Korean factory has stopped some production lines.
In the face of the current market conditions, Chen Junsheng expressed his emotion that "a hundred days is not a good thing." Cai Huifen, vice president of the Gartner Research Institute, a market research and consulting firm, also made it clear: "In the early days of the outbreak in 2020, people's demand for online classes and online office increased greatly, so there was a wave of replacements. But at this time, China's PC market has already In a state of saturation. Now, the peak of the replacement wave has passed, and sales will naturally decline.”
Generally speaking, the life cycle of PCs will exceed five years, and the last wave of replacements has just passed two to three years. The market demand is just stuck in a more embarrassing downward cycle.
The impact of the epidemic covers the whole society, and the joint and several reactions are violent. Among them, the supply chain that has a bottleneck effect on the electronic consumer industry has been deeply affected.
Canalys analyst Emma Xu explained the decline in Q2 sales: For most of the second quarter, factory and port operations in Shanghai, Kunshan and Jiangsu were disrupted, resulting in severe delays in orders from all major PC suppliers. Output was below normal throughout the second quarter, although production and coordination began to improve by the end of May.
Demand has plummeted, but supply chain costs have continued to climb.
According to the Observer.com report, the US CPU giant Intel has informed customers that due to soaring production and raw material costs due to global inflation, Intel will implement a wide range of price hikes on most products, involving personal computers, starting in the fourth quarter of October this year. and server CPUs, as well as products including PCHs, FPGAs, NUC minicomputers and other connectivity chips.
Tight supply chains and soaring costs from U.S. inflation have driven Intel's decision to raise prices.
Combining various factors, analysts generally look down on PC sales in 2022 - Gartner's recent forecast shows that global PC shipments will drop by 9.5% in 2022. Among them, the demand for PCs by enterprises is expected to drop by 7.2% year-on-year, and the demand for PCs by individual consumers will decline more significantly, falling by 13.1%.
