Gartner Says Profit Opportunities Exist for PC Vendors
The worldwide PC market registered one of its lowest quarterly growth rates in the first quarter of 2016, but a recent report by research firm Gartner Inc. states that several profit opportunities exist for system builders and other PC vendors.
"PCs are no longer the first or only devices users are choosing for Internet access," says Meike Escherich, principal research analyst at Gartner. "Over the last five years, global shipments of traditional PCs (desktops and notebooks) have fallen from 343 million units in 2012 to an estimated 232 million units in 2016. In terms of revenue, the global PC market has contracted from $219 million in 2012 to an expected $137 million in 2016."
Many vendors in the mid-tier of the PC ecosystem are struggling. "They are severely reducing their regional and country-level presence, or leaving the PC market altogether," adds Escherich. "Between them, Acer, Fujitsu, Samsung, Sony, and Toshiba have lost 10.5 percent market share since 2011. In the first quarter of 2016, Dell, HP Inc., and Lenovo gained market share, but recorded year-over-year declines."
"Nevertheless, PCs are still able to deliver in areas that smartphones and tablets cannot, with larger screens, ergonomic keyboards, greater storage, and more powerful computer processors," says Tracy Tsai, research vice president at Gartner. "With an oversaturated market and falling average selling prices (ASPs), PC vendors must focus on optimizing profitability to sustain growth."
Gartner’s report, "Market Trends: Three Key Strategies to Increasing Profits in the PC Market," outlines:
- The Growing Demand for Ultramobile Premium Devices
Despite slumping PC sales, the ultramobile premium market segment is on pace to achieve revenue growth this year. Gartner defines ultramobiles as midsize, lightweight tablets, PCs, and convertibles that typically have a display size between 7-inches and 13.9-inches and weighs under 3.5 pounds. It is estimated to reach $34.5 million, an increase of 16 percent from 2015.
"The ultramobile premium market is also more profitable in comparison with the low-end segment, where PCs priced at $500 or less have 5 percent gross margins," says Ms. Tsai. "The gross margin can reach up to 25 per cent for high-end ultramobile premium PCs priced at $1,000 or more."
Gartner predicts the segment will continue to grow thanks to replacement demand for traditional PCs and the touch experience that the two-in-one market (tablets and hybrids) provides. While the average selling price for the ultramobile premium segment is not expected to fall rapidly, it will eventually move toward $600 in constant-currency terms.
- Long-Term Profitability of Gaming PC Market
While the gaming PC market is very small with only a few million units sold a year, the average selling price of a gaming PC is significantly higher than that of a non-gaming PC. Prices range from $850 for an entry-level gaming PC notebook to $1,500 for a premium model.
"The high-end, purpose-built gaming PC segment (for example, $1,000 or more) is where PC vendors should focus for long-term profitability, despite this segment's competitiveness," says Tsai.
- Opportunities within the Internet of Things Market
The report encourages system builders to look to the Internet of Things (IoT) market and identify areas that have the most potential for profit. For example, they can use the IoT to improve customer service and product improvement.
"Vendors could detect with sensors if a battery is getting too hot or a hard-disk drive is being overworked, and they could send an alert to customers to get PCs checked before they suddenly go down," explains Tsai. "This would save vendors' operating costs and also helps users with better service."
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