PC sales head south as users look for reasons to buy

Weak demand in the consumer and commercial markets drove a sharp drop in PC shipments in the first quarter, with analysts predicting PC sales will remain down until next year.

IDC reported Monday that first-quarter shipments plummeted 29% to 56.9 million units, compared to 80.2 million a year ago.

All the leading PC makers saw sales plummet, including market leader Lenovo by 30.3%; Dell by 31%; and HP, Inc. by 24.2%. Apple led the pack with a whopping 40% decline, despite releasing a handful of new laptops and desktops in January. However, Apple outpaced other computer makers in fourth-quarter sales last year.

Inflation and the ongoing fears of a recession sparked by the Federal Reserve System raising interest rates triggered the pullback in IT spending by businesses and consumers.

"The challenge the industry is facing is excess inventory right now," said Ryan Reith, group vice president for IDC's consumer device tracking service. "The oversupply has led to a slowdown across the industry. PC makers are ordering fewer components, forcing chipmakers to cut back on CPUs, graphic chips and memory."

PC component makers started to see inventory rise around the middle of last year as orders from PC manufacturers slowed, Reith said. Nevertheless, manufacturing across the industry continued because none of the players wanted to be short on inventory if demand suddenly increased. The PC industry's holiday season was also weaker than expected, opening the door to a poor first quarter.

"They saw the warning. It's just nobody wants to make a drastic pullback call," Reith said. "A lot of these same companies were left short supplied early in the pandemic when things took off."

Another contributing factor was consumers and businesses buying a lot of PCs during the pandemic to support employees working from home. Those systems won't need replacing anytime soon, Reith said.

"We're at the correctional stage of what happened the last couple of years, and we're going to continue correcting for most of this year," Reith said.

Other than waiting for PCs to age out, what could boost PC sales would be more powerful GPUs in desktops and laptops to handle AI technologies beyond OpenAI's ChatGPT, such as AI inferencing, according to one analyst. However, that might take another year or two.

The challenge the industry is facing is excess inventory right now. The oversupply has led to a slowdown across the industry, so PC makers are ordering fewer components, forcing chipmakers to cut back on CPUs, graphic chips and memory.

"When someone finds a way to do local AI processing with inference, that would be something interesting for people to consider because it's only done on servers right now. There's no reason to upgrade desktop hardware," said Ezra Gotthheil, an analyst with Technology Business Research. "Baking more AI into things like [Microsoft's] Bing or Office won't make much difference to users."

While PC inventories improved in the last few months among distributors and resellers, inventory is still "well above" the normal four-to-six-week range, said Jitesh Ubrani, research manager for IDC's Mobility and Consumer Device Trackers. Even if there is heavy discounting, he said, elevated inventories will persist into the middle of next year and "potentially" into the third quarter.

Analyst firm Canalys further confirmed the downward slide of the PC market, reporting that worldwide PC shipments fell 33% to 54 million units in the first quarter compared to a year ago. Notebooks suffered the most significant decline, falling 34% year over year to 41.8 million units. Desktop systems fared only slightly better, sliding 28% to 12.1 million units, according to the report.

As Editor At Large with TechTarget's News Group, Ed Scannell is responsible for writing and reporting breaking news, news analysis and features focused on technology issues and trends affecting corporate IT professionals.

Antone Gonsalves is networking news director for TechTarget Editorial. Since the mid-1990s, he has worked for UBM's InformationWeek, TechWeb and Computer Reseller News. He has also written for Ziff Davis' PC Week, IDG's CSOonline and IBTMedia's CruxialCIO, and rounded all of that out by covering startups for Bloomberg News. He started his journalism career at United Press International, working as a reporter and editor in California, Texas, Kansas and Florida. Have a news tip? Please drop him an email.