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Monday, March 02, 2009
Gartner Says PC Industry Will Suffer Sharpest Unit Decline in History in 2009


The PC industry will experience its sharpest unit decline in history, with PC shipments totaling 257 million units in 2009, an 11.9 percent decline from 2008, according to Gartner.

Previously, PC units experienced their worst decline in 2001 when unit shipments contracted 3.2 percent.

"The PC industry is facing extraordinary conditions as the global economy continues to weaken, users stretch PC lifetimes and PC suppliers grow increasingly cautious," said George Shiffler, research director at Gartner.

Both emerging and mature markets are forecast to suffer unprecedented market slowdowns. Up to this point, emerging markets collectively recorded their lowest growth in 2002, 11.1 percent. Mature markets recorded their lowest growth in 2001, negative 7.9 percent. Both emerging and mature markets will handily surpass these previous lows in 2009, with emerging markets expected to post a decline of 10.4 percent and mature markets a decline of 13 percent.

"Growth in both emerging and mature markets will be driven by similar dynamics even if the precise impacts vary somewhat. Slower GDP growth will generally weaken demand and slow new penetration, lengthening PC lifetimes will reduce replacements, and supplier caution will keep inventories at historic lows until confidence in a recovery eventually firms," Mr. Shiffler said. "The impact of reduced replacements will be especially acute in mature markets, where replacements are estimated to account for around 80 percent of shipments."

Worldwide mobile PC shipments are expected to reach 155.6 million units, a 9 percent increase from 2008. Desk-based PC shipments are forecast to total 101.4 million units, a 31.9 percent decline from 2008. Mobile PC growth will be substantially boosted by continued growth in mini-notebook shipments; excluding mini-notebooks, other mobile PC shipments will grow just 2.7 percent in 2009.

Worldwide mini-notebook shipments are forecast to total 21 million units in 2009, up from 2008 shipments of 11.7 million units. Mini-notebooks will cushion the overall PC market slowdown, but they remain too few to prevent the market?s steep decline. Mini-notebooks are forecast to represent just 8 percent of PC shipments in 2009.

"The mini-notebook market is dividing as vendors offer more systems with 9" to 10" screens in addition to those to with 7" to 8" screens," said Angela McIntyre, research director at Gartner. "For the most part, users are moving toward systems with larger screens and greater capabilities; systems with 8.9" screens were the standard in the second half of 2008. Naturally, systems with larger screens and greater capabilities cost more but prices in general continue to fall. In late 2008, the average price in the U.S. for a mini-notebook with an 8.9" screen, Microsoft Windows XP and a 160 GB hard drive was around $450. We expect the average price of the same machine to drop to $399 by the end of this year. Mature markets continue to be the primary consumers of mini-notebooks, but as prices continue to fall, they are likely to attract increasing numbers of emerging market buyers."

Gartner analysts said overall, original equipment manufacturers (OEMs) and the channels are able to react much faster to changing market conditions than in previous years. Razor thin margins and the lessons learned in 2001 have schooled PC vendors and channels in the necessity to invest in their supply chains. These investments have given them much better visibility of demand, even though products are largely being built in Asia by third parties and therefore have long lead times.

"Normal seasonality typically means that the third quarter sell in is stronger than sell out, due to inventory build effects, but clearly in the fourth quarter of 2008 vendors saw signals that demand was weakening and sent signals up the supply chain to stop building," said Charles Smulders, managing vice president at Gartner. "At the same time, the channel cut back inventory due to a combination of economic uncertainty and the credit squeeze. Unlike 2001, vendors were able to react relatively quickly to the signals and push the inventory risk on to the component suppliers. We expect the pattern of stronger sell out demand than sell in to continue through the first half of 2009, with the channel choosing to hold inventory at historically low levels."


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