Due to the surge in COVID demand for business and consumer desktops and laptops, PC makers have struggled to build enough computers and source many components. However, as store shelves are now mostly stocked, demand for PCs has slowed due to inflation and uncertainties caused by the war in Ukraine. As a result, Acer President Jason Chen warned this week that an oversupply of laptops was coming.
Weakening consumer demand for PCs
Rising prices for energy, food and other essentials have led to record inflation rates around the world. As a result, many people are reconsidering their consumption habits and reducing their tech purchases. In general, the past few months have not been particularly good for client PC sales in the consumer sector, reports DigiTimes. Acer, Asus and HP have indicated in recent weeks that the consumer market is showing signs of weakness and demand is declining.
“From a demand perspective, we expect to continue to see strong commercial demand with some slowdown in consumer business,” said HP President and CEO Enrique Lores on the earnings call. of the company on May 31. “From a supply perspective, we see two constrained quarters. First, industry-wide component shortages that we expect will continue through fiscal 2022; second, the COVID-related disruptions in China, which we believe will primarily impact the third quarter of the fiscal year.
HP’s commercial PC sales were up 18% year-over-year in the second quarter of 2022, while sales of the company’s consumer systems were down 6% year-on-year. In terms of product categories, higher prices and sales of high-end systems boosted notebook PC revenues by 3%, increased desktop PC revenues by 28% and boosted workstation sales. 21% year over year.
According to IDC, weak consumer PC demand will reduce PC shipments in 2022 by 8.2% from a year earlier. Desktop and Laptop Shipments Reached 348.8 million units in 2021, so they are expected to drop to 321.2 million units this year.
Inventories become passive
Since PC demand began to outpace supply in the second quarter of 2020, PC makers have been working overtime to source components and build inventory to meet demand. Major PC makers like Acer, Dell and HP bought chips directly from their developers/manufacturers and stockpiled them to avoid disruptions to their supply chains.
Now that demand for consumer PCs is falling (but not to pre-pandemic levels), their inventory is becoming liabilities as oversupply drives prices down, which is good for the end user but not good for deals. In fact, the president of Acer reportedly said that laptop supply had already exceeded demand.
Companies like Acer, Asus, Gigabyte and MSI generally sell to consumers, so they will suffer from a slowdown in demand, especially for entry-level and mid-range systems. DigiTimes recalls that based on the first quarter balance sheets, the value of the stocks of Acer, Asus, MSI and Gigabyte increased year-on-year by 26.59%, 79.51%, 77.62% and 64.59%, respectively. Inventory accumulation could be good if the demand was there, but now that it is weakening, they could become losses since certain components and finished products are rapidly losing value.
However, not all PC makers are suffering from a slowdown in demand or worried about oversupply in the market. For example, if you buy a 14/16 MacBook Pro from Apple today (in the US or Europe), the company won’t be able to ship it until August. The systems are, however, available for pickup at select Apple stores.