The recession is the key issue for practically all high-technology industries so far in 2009, and the PC industry is no different, as it too has been hurt by the effects of the downturn, according to iSuppli Corp.
Out of the three segments that make up the overall PC market, two are suffering significantly as a result of greatly reduced sales: desktops and entry-level servers.
Desktops have been the weakest sector of the PC business so far in 2009, dragging down the market’s overall performance. And to make matters worse, iSuppli believes they will continue to post a very poor performance for the remainder of the year.
In the first quarter of 2009, desktop shipments declined by 23 percent on a year-over-year basis, and iSuppli expects a similar level of decrease to occur in the second quarter. This will result in a 21 percent decline in unit shipments in the first half of 2009 compared to the same period in 2008.
In black and white terms, this decline means that for every five desktops PCs shipped in the first half of 2008, only four were shipped during the same period in 2009.
Daily Uncertainty
But why has there been such a significant decline in desktop shipments?
The credit crisis and recession have introduced a huge degree of uncertainty into daily life through the crumbling of bedrock organizations, such as banking and finance. These are institutions that not only allow consumers and companies to function at an economic level, but also are huge employers in their own right. As a result of the uncertainty, there has been a reduction in consumer willingness, and ability, to spend money.
When consumers or companies that are able to spend money decide to buy a PC, iSuppli believes that in many cases the desktop platform is struggling to compete with the very strong value proposition of the notebook PC. In other words, the desktop is seen as offering a lower value proposition relative to the notebook. Therefore, shipments of desktops are declining while those of notebooks are growing.
Servers Get Served
This uncertainty in the corporate market also is hitting the other segment within the PC market: entry-level servers. With the recession impacting IT budgets, shipments of servers also are being hit hard as existing hardware is pushed to last longer. iSuppli believes that shipments in the first quarter of 2009 were down 11 percent on the year-over comparison, a situation that won’t change until the latter part of 2009.
However, there is a silver lining in the PC cloud: the notebook computer segment. This segment also has been hit by the effects of the recession, manifesting in lower-than-expected growth rates, but it is still generating growth. Simply stated, while other PC segments are shrinking, the notebook segment continues to grow.
iSuppli expects that combined notebook shipments for the first half of 2009 will be up 12 percent from the same period in 2008.
As the figure shows, PC growth rates have declined significantly in the first half of 2009 relative to 2008. The constant in both 2009 and 2008 is the growth in notebook PC shipments.
Late Reprieve
Looking beyond the first half of 2009, the PC market will not produce quarterly year-over-year growth until the latter part of the year. This growth will be driven by a number of factors, such as the return to 2008 levels of year-over-year growth for quarterly notebook shipments, along with a cessation of the quarterly year-over-year shipment decline in the entry-level server segment.
However, because the majority of the PC market in 2009 will be affected by the recession, iSuppli believes annual PC shipments in 2009 will suffer a decline of 4 percent—with the key problem area being the desktop segment. The second half of 2009 is vitally important for the PC market, because if shipments of desktop PCs continue to contract at current levels, the impact on th
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