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PC Shipments Plunge in Q1 on Weak Demand & Excess Inventory

The decline in personal computer (PC) shipments aggravated in the first quarter of 2023, according to the latest data compiled by market research firm International Data Corporation (“IDC”). The latest data compiled by the market research firm depicts the fifth consecutive quarter of PC sales decline following two successive years of strong year-over-year growth, driven by pandemic-led increased demand for remote-working and online-learning tools.

Per the preliminary data released by IDC, PC shipments in the January-March 2023 quarter plunged 29% year over year to 56.9 million units. In the first, second, third and fourth quarter of 2022, PC volumes declined 5.1%, 15.3%, 15% and 28.1%, respectively.

Apple Registers Biggest Fall in Q1

IDC revealed that all vendors registered steep year-over-year declines in their PC sales volumes. Per the data compiled by the market research firm, Apple AAPL registered the highest fall of 40.5% to 4.1 million units, followed by Dell Technologies’ DELL 31% to $9.5 million PCs.

Computer - Mini computers Industry 5YR % Return

Computer - Mini computers Industry 5YR % Return
Computer - Mini computers Industry 5YR % Return

Computer - Mini computers Industry 5YR % Return

PC volumes of Lenovo LNVGY and ASUS each fell 30.3% to 12.7 million and 3.9 million units, respectively. HP Inc. HPQ shipments contracted 24.2% to 12 million units.

Per IDC, Lenovo continues to hold the top spot in the vendor list, followed by HP and Dell, with a market share of 22.4%, 21.1% and 16.7%, respectively. Apple and ASUS ended the January-March quarter with a market share of 7.2% and 6.8%, respectively.

While shares of LNVGY gained 9.5% over the past year, HPQ, DELL and AAPL stocks have plunged 21.5%, 12% and 3.3%, respectively. Apple and Lenovo each carry a Zacks Rank #2 (Buy), while HP Inc. and Dell both have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Why Are PC Sales Falling?

IDC opines that the year-over-year decline was mainly due to weakening consumer demand for PCs, high inventory levels and a bleak economic outlook. Softening IT spending amid the ongoing economic and geopolitical uncertainties resulted in a decline in demand for PCs.

In 2020 and 2021, PC manufacturers benefited from increased demand amid the pandemic-induced remote-working and online-learning wave. The pandemic necessitated using PC systems for remote work, web-based learning, video conferencing, video gaming, social media, consumer entertainment and streaming or online shopping.

However, the back-to-back five quarters of declining PC shipments depict an end to the industry’s demand boom. We believe that consumers have become more cautious about their spending due to inflationary pressure, rising interest rates and fears of a possible recession. Furthermore, Enterprises are delaying their large IT spending amid the macroeconomic challenges.

Pain to Persist in the Near Term

IDC cites no relief for PC makers in the near term due to persistent high channel inventory issue and ongoing macroeconomic headwinds. Jitesh Ubrani, research manager at IDC's Mobility and Consumer Device Trackers stated that, "Though channel inventory has depleted in the last few months, it's still well above the healthy four to six week range." He further added, "Even with heavy discounting, channels and PC makers can expect elevated inventory to persist into the middle of the year and potentially into the third quarter."

Additionally, inventory is likely to remain elevated in the near term as PC makers are altering and placing orders for Chromebooks in anticipation of a probable increase in licensing costs later this year. Nonetheless, the research firm forecasts that an expected improvement in the global economy and the possibility of consumers and organizations opting to upgrade to Windows 11 might lead to growth in PC volumes by the end of 2023.

Linn Huang, research vice president, Devices and Displays at IDC said that "By 2024, an aging installed base will start coming up for refresh." He further added, "If the economy is trending upwards by then, we expect significant market upside as consumers look to refresh, schools seek to replace worn down Chromebooks, and businesses move to Windows 11. If recession in key markets drags on into next year, recovery could be a slog."

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