The PC landscape has been transformed in the last year. First, one of its juggernauts IBM sold its PC division to Chinese PC maker Lenovo. Then last week, research group Gartner announced that the EMEA region has surpassed the US as the largest PC market for the first time ever.
Buoyant international markets were able to pick up the slack felt in North America last year as annual worldwide shipments for 2005 reached new highs – to 218.5 million units in 2005 from 189.5 million in 2004. And within this upbeat and diversified marketplace, trends could provoke a shift in share of the major PC vendors.
Ranjit Atwal, PC analyst at Gartner told OPI+: "The US market is very mature so we were expecting it to be taken over by EMEA but we weren’t expecting it to happen this year. EMEA grew faster than predicted at the start of early 2005 thanks to PC mobile sales and big price declines across all of Europe, which helped to give the market a push."
In fact most markets came in ahead of expectations, with worldwide shipments increasing 17 per cent year-on-year, according to IDC’s worldwide quarterly PC tracker. Furthermore, 2005 marked the strongest growth in the past five years for Asia-Pacific – 18 per cent with shipments of 41.1 million units. Director of the tracker Loren Loverde said: "Although growth has declined slightly from the second and third quarters, the market’s resilience in the face of rising interest rates, high fuel prices, a weaker euro, and other potential inhibitors puts the market in a great position to start 2006."
The fastest growth was in Asia-Pacific and Latin America, where sales increased 26 per cent to 42.8 million and 14.7 million respectively. But there were some surprising drivers too, said Gartner’s Atwal. The Nordic countries, although suffering from PC-saturation, announced their employee purchasing programmes, which helped to re-ignite the market. Educational programmes in Poland had a similar effect. In Saudi Arabia, the hike in oil prices has started to trickle down into the salaries of the everyday PC user.
Consistent growth, meanwhile, came from Russia, the southern European countries of Spain, Portugal and Italy, and increasingly, India and China, which are making enormous jumps to being PC-literate, added Atwal. The only real black spot is Germany, where there is a tough PC environment. But even that market grew in double digits this year.
PC vendors need to be more aware than ever of changing factors across different markets to stay ahead of the game. But, said Atwal, this is not always the case, which could mean some fall-outs in 2006. "PC vendors need to look at the market in more segmentation. Compare the PC market to the automotive market: different models fit different uses and needs. Over time, consumers will go back into the market and demand specific things. And as the mature market fragments, vendors need to address the market and the channel and the education of the whole supply chain…But while this happens there could be casualties. There is not enough margin to go round, and it will pinch this year."
So who are the most likely victims? Atwal believes some Japanese vendors that have not been stringent when it comes to their supply chain will come under more pressure.
Even market leader Dell, which boosted its share of shipments in Q4 to 17.2 per cent from 16.8 per cent a year ago, still has lessons to learn, according to Atwal. Having traditionally relied on the US market for growth, it "needs to do more if it wants to meet its margin requirements".
Josh Claman, VP and general manager for Dell UK, told OPI+ Dell was bullish about its prospects for 2006. "Our build-to-order model allows us to offer the latest technology with our products as soon as it is available, without the added cost of inventory or the need to sell through old stock. This allows Dell to move swiftly, build direct relationships with customers and ultimately remain competitive within the PC market."
Hewlett-Packard (HP), with 15.7 per cent of PC shipments in Q4, had a shaky year but is now in a pretty good position in Europe and Asia-Pacific, said Atwal, by doing simple stuff like addressing the right products. "It needs clear discipline, which wasn’t there before. Hurd coming in has helped the company because he is a straightforward numbers guy rather than a big picture guy. And of course its printer business is supporting the company through this."
HP was not available for comment.
Lenovo, by contrast, has missed out on significant opportunities over the last year, Atwal believes. "The company has not moved as fast as it needed to to address the consumer market quickly. It could have made gains with an IBM/Lenovo consumer product but it missed that opportunity. It also has work to do in terms of supply chain execution, and of course it has had a recent change of CEO and chairman…Lenovo was looking good a while ago but it is still in the IBM frame of mind. It needs its own identity."
In an interview with OPI+, in-house analyst at Lenovo Adrian Horne said that Lenovo remains adamant in its goal to become market leader, but that its priority now is to manage sustainable and profitable growth. Its strategy, he said, is based around "best-value notebooks with innovative features" and emerging markets. "Lenovo has an aggressive growth strategy in place that includes emerging markets such as Russia, Brazil and India, and more competitive offerings for the small and very small business, which will be introduced during 2006," he said.
Taiwan-based Acer has more of a success story this year. By delivering faster and cheaper, it has managed to create demand for itself, said Atwal.
Gartner expects PC volume growth in 2006 and 2007 to remain in double digits. Emerging trends such as biometric security, wireless networking, and virtualisation (running multiple operating systems on one PC), not to mention the launch of Microsoft Vista, the successor to XP, this year, may also provide an extra boost.
It looks like an interesting year.