Worldwide PC shipments totaled 76.6 million units in the first quarter of 2014, a 1.7 percent decline from the first quarter of 2013, according to preliminary results by Gartner. The severity of the decline eased compared with the past seven quarters.
All regions indicated a positive effect since the end of XP support stimulated the PC refresh of XP systems. Professional desktops, in particular, showed strength in the quarter. Among key countries, Japan was greatly affected by the end of XP support, registering a 35 percent year-over-year increase in PC shipments. The growth was also boosted by sales tax change. We expect the impact of XP migration worldwide to continue throughout 2014
While the PC market remains weak, it is showing signs of improvement compared to last year. The PC professional market generally improved in regions such as EMEA. The U.S. saw the gradual recovery of PC spending as the impact of tablets faded.
The PC market continued to be tough for many vendors. Economies of scale matter tremendously in this high-volume, low-profit market, which is forcing some vendors, such as Sony, out of the market. In contrast, all of the top five vendors, except Acer, registered year-over-year shipment growth. The top thee vendors — Lenovo, HP and Dell — have all confirmed the importance of the PC business as part of their overall business strategies.
Lenovo experienced the strongest growth among the top five vendors. Its shipments grew 10.9 percent and Lenovo extended its position as the worldwide leader. The company’s shipments grew in all regions except Asia/Pacific, where growth in China has been problematic. Overall, the China market again slowed, in part due to the long holiday in the middle of the quarter.
Lenovo’s innovation lies in its technology, products, business model and cultural management, according to Liu Chuanzhi, founder of the Lenovo Group and president of Legend Holdings Ltd., and Yang Yuanqing, CEO of Lenovo.
International acquisitions fueling global innovation
Referring to Lenovo’s innovation history, people tend to indulge in the story of Lenovo’s buying IBM’s PC business in 2004. “At that time, Lenovo didn’t expect to become the global leader of PC industry”, said Yang Yuanqing with emotions.
To date, Lenovo’s Innovation Triangle Teams in the USA, Japan, and China collaborate have been fusing together different cultures of different countries and collaborating in a 24-hour non-stop manner to ensure leading position of Lenovo’s innovation in the world.
After successfully absorbing IBM’s PC business, Lenovo’s international acquisitions have been unstoppable. Lenovo’s international mergers, from single business like PC and server to comprehensive business like cloud computing, serve not only as effective strategies for Lenovo to strengthen its operation volume and optimize market distribution, but also a way for Lenovo to bring in talented people from different fields and fill its innovation teams with new blood.
At present, Lenovo owns about 11,000 patents globally, about 2/3 of them coming from China and 1/3 from oversea teams. According to Zhang Dekui, director of Lenovo’s Innovation division, Lenovo spends USD500 million on R&D every year, and has 5,000 product developers, including engineers, researchers, and designers, and more than 100 advanced labs around the globe. These constitute Lenovo’s unique innovation and quality guarantee system.
Complete industry chain supporting innovations on multiple levels
Liu Chuanzhi has said that “Lenovo’s first innovation is to combine technology with the high-tech industry”. In 2012, when sales of Lenovo’s PCs were thriving across the world, Lenovo keenly grasped the new trend of the mobile internet and started its PC+ strategy, beginning to increase investment in mobile internet terminals like smartphones, tablet computers, and smart TVs in the meantime of consolidating its advantages in the PC industry.
Today, the fall of some traditional PC manufacturers and the achievement of Lenovo in the PC+ area have proved that Lenovo has made a right decision. In the Q2 of the 2013 fiscal year, the global market share of Lenovo’s smartphone increased to 5.1 percent, behind only Apple and Samsung, and the growth of its tablet computers was even higher. Also, sales of Lenovo’s tablet computer and smartphones had exceeded that of its PCs for two quarters in a row, their revenue accounting for 15 percent of total revenue of the company and profit margin steadily on the rise.
In Lenovo’s Innovation Center, Lenovo’s employees, from system design engineer to software application researcher, from part technology R&D director to product design director, demonstrated Lenovo’s innovation industry chain to the reporter. Lenovo has set up technologies in four major fields to bolster the entire Lenovo business innovation endeavor, including part technology and system innovation, natural interaction technology, cloud service and big data technology, and new materials and design innovation. These make up Lenovo’s core R&D innovation strategy, dubbed “one cloud and multiple screens”, and they are also the source of Lenovo’s business innovation.
Independent manufacture and protection of innovation achievements
In October 2013, Lenovo’s industry base in Wuhan was completed and put into operation. This is a comprehensive industry base that integrates R&D, production, and sales of mobile internet terminals, with a total investment of more than RMB5 billion Yuan. “In this base, a product will need to go through dozens of labs before it is finally put onto the market, and it will be examined and checked repeatedly during production. This is the advantage of independent production and development. It can protect our innovations”, said Yang Yuanqing.
There used to be doubt that Lenovo was a computer assembler and not a core technology innovator. For this, in 2011 Lenovo began to shift its focus onto parts and components, striving to achieve breakthroughs in component technologies and walk ahead of competitors in terms of system innovation. This requires Lenovo to attach more importance to working with upstream manufacturers, extensively consolidate upstream and downstream technologies, and provide parts for system innovation. Lenovo’s independent manufacturing enables it to communicate directly with upstream manufacturers, which would increase its leverage for innovation.
10 years ago, Lenovo introduced a relation-type business model that targeted at corporate customers and government customers, to go along with its consumption business model that targeted consumers. That was a business model innovation. Now, Lenovo again introduced a new-era dual business models, with one online model and one offline model, and its marketing campaign is moving from traditional advertising to internet marketing, digital marketing, and micro-blogging marketing, etc.
In 2012, Lenovo added “Pioneer” to its 4P corporate culture, showing its intention to be a pioneer of the time. Internally, Lenovo has its unique innovation mechanism, including CEO innovation discussion, ideas management, etc, so as to promote the realization of technology and product R&D.
2013: Global SMARTPHONE market share: Samsung 32.3%, Apple 15.5%, Huawei 5.1%, LG 4.8% Lenovo 4.6%.
Global Smartphone Shipments Reach a Record 990 Million Units in 2013.
Global smartphone shipments grew 41 percent annually to reach a record 990 million units in 2013. Huawei, Lenovo and LG were the star performers, capturing a combined 14 percent marketshare worldwide and closing the gap on Apple.
Global smartphone shipments grew 34 percent annually from 217.0 million units in Q4 2012 to 290.2 million in Q4 2013. Global smartphone shipments for the full year were just shy of the 1 billion level, but they nonetheless reached a record 990.0 million units in 2013, increasing from 700.1 million in 2012. Global smartphone shipment growth decreased slightly from 43 percent in 2012 to 41% in 2013, due to high penetration in some major markets like the United States.
Samsung shipped a record 319.8 million smartphones worldwide and captured 32 percent marketshare in 2013. This was the largest number of units ever shipped by a smartphone vendor in a single year. Despite tough competition from a long tail of Chinese and American brands, Samsung continued to deliver numerous hit models, such as the Galaxy S4 and Note 3.
Apple grew a sluggish 13 percent annually and shipped 153.4 million smartphones worldwide for 15 percent marketshare in 2013, dipping from the 19 percent level recorded in 2012. Apple remains strong in the high-end smartphone segment, but a lack of presence in the low-end category is costing it lost volumes in fast-growing emerging markets such as India.
Samsung and Apple together accounted for almost half of all smartphones shipped worldwide in 2013. Large marketing budgets, extensive distribution channels and attractive product portfolios have enabled Samsung and Apple to maintain their grip on the smartphone industry. However, there is clearly now more competition coming from the second-tier smartphone brands.
Huawei, LG and Lenovo each grew their smartphone shipments around two times faster than the global industry average and captured a combined 14 percent marketshare. Huawei is expanding swiftly in Europe, while LG’s Optimus range is proving popular in Latin America, and Lenovo’s Android models are selling at competitive price-points across China. Samsung and Apple will need to fight hard to hold off these and other hungry challengers during 2014.
Worldwide, IDC estimates 76.9 million tablets were shipped in Q4 2013, which comes out to 62.4 percent growth over Q3 2013 and 28.2 percent on Q4 2012. In all of 2013, 217.1 million units were shipped, up from 144.2 million in 2012.
IDC’s latest Q4 2013 report of global tablet shipments showed only Lenovo and Samsung increased their market share among the top five brands.
Apple still holds a firm position at the top with 33.8 percent of the market, but that figure fell 4.4 percent year-on-year. South Korea’s Samsung, in second place, gained a hefty 5.8 percent of the market and shipments grew 85.9 percent year-on-year. China’s Lenovo rounded out the top five growing from 1.3 to 4.4 percent market share. That might not seem like much, but Lenovo’s shipments more than tripled in the past year.
Lenovo’s access to the Chinese whitebox manufacturing infrastructure has helped it drive more low-priced tablet products into the market; the company’s strength in emerging markets, and its increased market share in adjoining markets such as PCs and smartphones, makes it well positioned to see additional tablet gains in 2014.
Amazon and Asus make up the remaining spots in the top five. Amazon’s market share dipped from 9.9 to 7.6 percent, while Asus held a steady 5.1 percent.
The PC market has been on the decline for the past year, but there are new hints that the situation is improving — if only slightly. Both Gartner (shown here) and IDC estimate that worldwide computer shipments dropped roughly eight percent year-over-year in the third quarter. While that’s not exactly comforting to vendors, it’s better than the double-digit losses of the past several months; the analyst groups even saw flat or positive growth in countries like Japan and the US. Any further declines in some regions may be relatively gentle, Gartner says.
As for who’s out in front?
Heavyweights like Lenovo, HP and Dell grew thanks to improving business sales and some advance shipments of Windows 8.1 PCs. Acer and ASUS, meanwhile, were dealt the worst blow as their netbook sales continued to suffer from the rise of mobile OS tablets. Neither Gartner nor IDC is predicting a turnaround for the industry, but they suggest that PC builders are finally figuring out their places in a world where mobile devices rule.
Not only PC, but MAC also
Another interesting piece of data we glean in the report is that Apple (AAPL) experienced a PC shipment decline of 11.2% in the third quarter. Perhaps, iPhone and iPad are cannibalizing MAC sales. It’s something to watch in the upcoming quarterly results. Smartphones and tablets have compressed the tech giant’s margins, falling Mac sales might further the problem; although management recent said margins will be higher thanks to iPhone 5S sales. Nobody actually wants the 5C as its price has been cut by many vendors already.
The way of the VHS
The PC is going the way of the VHS. Investors would be better served focusing on tablet leaders and suppliers. Even smartphone sales are beginning to moderate.
- PC shipments fall for sixth straight quarter (nbcnews.com)
- The PC Industry Shrank Another 9%, Gartner Says (AAPL, HPQ) (businessinsider.com)
- The PC Industry Shrank Another 9%, Gartner Says (AAPL, HPQ) (embargozone.com)
- IDC and Gartner: Q3 2013 PC shipments not as bad as predicted, but still bad (neowin.net)
- PC sales continue to fall as smartphones, tablets cut demand (ctvnews.ca)
Worldwide PC shipments totaled 76.3 million units in the first quarter of 2013 (1Q13), down -13.9% compared to the same quarter in 2012 and worse than the forecast decline of -7.7%, according to the International Data Corporation (IDC) Worldwide Quarterly PC Tracker. The extent of the year-on-year contraction marked the worst quarter since IDC began tracking the PC market quarterly in 1994. The results also marked the fourth consecutive quarter of year-on-year shipment declines.
Despite some mild improvement in the economic environment and some new PC models offering Windows 8, PC shipments were down significantly across all regions compared to a year ago. Fading Mini Notebook shipments have taken a big chunk out of the low-end market while tablets and smartphones continue to divert consumer spending. PC industry efforts to offer touch capabilities and ultraslim systems have been hampered by traditional barriers of price and component supply, as well as a weak reception for Windows 8.
“Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome,” said David Daoud, IDC Research Director, Personal Computing.
United States – The U.S. market had another dismal quarter in 1Q13, contracting -12.7% year on year, with a drop of -18.3% compared to the fourth quarter of 2012.
EMEA – As expected, Europe, Middle East and Africa (EMEA) remained constrained, posting a stronger double-digit decline than anticipated in the first quarter of 2013. The market response to Windows 8 and touch-enabled devices remained slow.
Japan – PC shipments were in line with expectations in the first quarter. Some economic improvement is helping to support commercial replacement demand ahead of the scheduled end of support for Windows XP next year. However, consumer shipments remained very weak.
Asia/Pacific (excluding Japan) (APeJ) – PC shipments in APeJ declined sharply, dropping a record -12.7% year on year, the first time the region has experienced a double-digit decline. Although much of the earlier Windows 7 stock had cleared, a lukewarm reception toward Windows 8 hampered new shipments.
HP remained the top vendor, but posted a substantial double-digit decline in shipments after an aggressive fourth quarter kept growth flat during the holidays. HP’s worldwide shipments fell more than -23% year on year in 1Q13.
Lenovo remained second in global shipments and nearly closed the gap with HP. Lenovo continued to outpace the market, notably expanding shipments with its attack strategy.
Dell saw shipments decline by more than -10% globally and -14% in the United States. The vendor continued to face tough competition and struggled with customer uncertainty about the direction of its restructuring.
Acer Group continued to see substantial declines in shipments across regions. As the leader in Mini Notebook shipments, the vendor has been particularly exposed to the decline in these systems. Slow consumer and SMB growth has also taken a toll.
ASUS managed some growth in the United States, but saw a substantial decline in EMEA and Asia/Pacific. The company’s substantial surge in Americas shipments in the second half of 2012 gave way to limited growth as demand weakened.
Apple fared better than the overall U.S. market, but still saw shipments decline as its own PCs also face competition from iPads.
Toshiba also saw shipments decline in the United States, but fared better than the overall market, benefitting somewhat from the restructuring of market leaders HP and Dell.
Perspective and Predictions
The main question is: why are we in such situation? Since beginning of 2012, we are now in a transition. People wants mobility. They buy tablets in order to have this usage. Until now, PC even laptops are too big, not adapted to mobility, not sufficiently autonomous and with a Windows in transition. These Laptops PC couldn’t be transformed in tablets, or with difficulties. Technologies were not there.
But in parallel, customers that bought tablets are viewing their current limits: easy to consume data and Apps, difficult to create documents or programs; in any case, less performing than PC.
In 2Q13, new tablets PC will be launched by several constructors. Very similar to tablets, and very similar to PC. But these Tablets PC will have too main difficulties: first is the price around 1500 euros for good touch tablet and for good PC with hard disk and minimum of 8 hours of usage and second is Windows 8, which remains in transition.
Then, the market will continue to decrease in 3Q13 and 4Q13. In 1Q14 or 2Q14 should be launched Windows 9 by Microsoft. Same tablets launched on 2Q13 will be sold around 800 – 1000 euros. Starting 2Q14 or 3Q14, PC market will re-increase, pushed in tablets PC.
Prediction is that in 2016, only 10% of PC sold will be Desktop and 90% will be Tablet PC. Starting half of 2014, the market of tablets “alone” (as current iPAD or Galaxy Tab) will decrease.