Personal computer shipments grew in the spring after two consecutive quarters of decline, which could be good for the coming results from chip makers and PC manufacturers, but brings up questions about the second half.
Two analyses of second-quarter PC shipments said Thursday that PC shipments grew: Gartner Inc. reported that PC sales rose 1.5% in the quarter to 63 million units, while rival IDC reported PC sales rose 4.7% in the quarter. IDC includes Chromebooks in its calculations, which typically accounts for much of the difference between the two.Last quarter, both market research firms reported that shipments fell for a second straight period.
Both credited manufacturers getting better access to core chips from Intel Corp. and attempting to get products out of China before more tariffs hit. The industry’s growth has been hampered by a shortage of certain Intel INTC, +0.81% INTC, +0.81% processors, an issue which also helped Advanced Micro Devices Inc. AMD, -2.16% sell more chips last quarter. While the U.S. and China reached a truce recently that should stop any more tariffs from being issued, a 25% tariff on many goods coming from China, where most companies manufacture their PCs, began being collected in late May.
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“Supply for Intel’s processors improved markedly during the quarter, allowing most PC vendors to fulfill old orders while also shipping a healthy supply of new PCs into the channels,” Jitesh Ubrani, an analyst at IDC, said in a statement. “Additionally, the threat of increased tariffs led some PC makers to ship a surplus of desktops and notebooks, thereby artificially propping up the PC market during the second quarter.”
That “artificial propping up” should be a concern more than a reason to celebrate, however. Many chip makers have been looking forward to a better second half of the year, amid predictions that the semiconductor downturn has bottomed. But if the PCs that just shipped last through the back-to-school and holiday seasons — the two best sales periods for the industry — we could see a pullback the rest of the year as retailers work through that inventory.
The inventories on the shelves and online could really last if prices go up due to the tariffs. PC makers will likely have to raise prices to make up for the additional fees they have to pay on goods made in China, even those made by U.S. manufacturers.
“The next phase of tariffs could have significant impact,” Gartner analyst Mikako Kitagawa said in a statement. “Most laptops and tablets are currently manufactured in China and sales of these devices in the U.S. could face significant price increases if the punitive tariffs are imposed and vendors do not take quick action to respond.”
In an email, Kitagawa added that some vendors are already working on moving part of production away from China in order to avoid tariffs. “But it takes time to shift the production. At the moment, there is lots of uncertainty.”
Aside from consumer PCs, the industry could be saved by the upcoming death of Windows 7. Microsoft Corp. MSFT, +0.40% plans to end support for Windows 7 in January 2020, meaning businesses that have not already moved to the newer Windows 10 operating system are in a crunch to do so.
“The closing sprint is unlikely to generate the spike seen when Windows XP met its [end of service] because we are further ahead of the migration with two quarters to go,” IDC analyst Linn Huang said in a statement. “Still, organizations looking to finish their migration will create new opportunities for the market in the coming quarters.”
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It’s not clear yet if the seemingly better-than-expected second-quarter data for PC shipments will lead to any estimate changes for U.S. hardware makers on Wall Street. HP Inc. HPQ, +1.26% and Dell Technologies Inc. DELL, +2.28% DELL, +2.28% DELL, +2.28% two of the three biggest PC makers worldwide, saw their market shares grow only fractionally compared with No. 1 Lenovo of China. Interestingly, the two analyses differed widely on Apple Inc. AAPL, -0.73% AAPL, -0.73% with IDC reporting that Apple’s PC shipments grew by 9.6% while Gartner said that they fell 0.2%.
When these companies report second-quarter earnings in the coming weeks, we will find out if the shipment boost was a boon for their finances, and which shop was right on Apple’s business. But the real question is the forecast, and what PC and chip companies think is going to happen to their inventories and sales as we enter the all-important second half.
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