The global PC industry hit a snag in the third quarter, as worldwide shipments declined for the first time in three quarters — despite hype around so-called artificial intelligence PCs and growth in the US and Japan.
According to Gartner, third quarter PC shipments, or devices sent out to retailers for sale, fell 1.3% year over year to 62.9 million units from 63.8 million units in the same period in 2023. Shipments dropped the most in China, with Gartner reporting a 10% collapse in demand in the country as government and state-affiliated entities sought out fewer desktops.
Shipments in Europe, the Middle East, and Africa took a less dramatic hit than China, dropping 1.5% due to a flurry of events that Gartner says distracted consumers, including elections in the UK and France and sporting events like the Olympics. The US, meanwhile, saw a 5.6% increase in shipments, while Japan saw double-digit growth in the quarter.
Still, the PC industry is in the midst of a broader comeback after years of declines and the massive amount of growth it experienced at the onset of the pandemic. At the time, consumers and enterprises bought up virtually as many PCs as they could get their hands on to ensure they had the means to work and stay entertained while stuck in their homes for months on end.
But that boom meant people who might have been holding off on buying PCs ended up purchasing them sooner than they otherwise would have, pulling future sales forward. With so many customers outfitted with new PCs, demand crumbled, leading to an extended slump that lasted roughly two years, including the worst decline in 17 years in 2023. The slump hit companies ranging from PC manufacturers for Microsoft (MSFT) to chipmakers Intel (INTC), AMD (AMD), and Nvidia (NVDA).
In Q2 2023, as sales struggled, Microsoft reported that its Windows OEM sales, or sales of its Windows operating system to laptop and desktop manufacturers, fell 39% year over year. Intel and AMD saw similar declines, with Intel reporting that its first quarter 2023 Client Computing Group revenue, the organization responsible for PC chip sales, dropped an incredible 38% compared to Q1 2022. AMD reported a 65% year-over-year drop in net revenue in its Client group in 2023 from $2.1 billion to $739 million.
The shipment declines come as the PC industry is pushing the concept of AI PCs, or computers outfitted with neural processing units (NPUs) or high-powered graphics cards that can run AI applications locally rather than via the cloud.
Microsoft is pushing its own version of AI PCs it refers to as Copilot+ PCs, which meet certain hardware requirements such as powerful NPUs. But the marketing doesn’t seem to be paying off.
According to Gartner analyst Mikako Kitagawa, AI PCs “did not boost the demand for PCs since buyers have yet to see their clear benefits or business value.”
What’s more, she said, the end of Windows 10 support in 2025 didn’t drive updates in areas like China.
There’s still plenty of debate about whether AI will become a huge selling point for consumer electronics, whether that’s PCs or smartphones. So far, Microsoft has shown off a number of potentially useful AI features for Windows 11, including its Click to Do option that provides you with a context-sensitive set of options to take action on what you’re viewing on your screen.
Microsoft says you can do things like remove or blur the background in a photo or perform a visual search using Bing, allowing the search engine to search for content based on images rather than words.
But it’s not clear yet if AI is a major selling point for consumers. Jefferies recently downgraded Apple’s stock saying that expectations for AI-powered iPhones are overblown. And if that holds true, you can bet it’ll be the same for PCs.
Regardless of the declines in Q3 or whether AI proves to be the kind of catalyst the industry needs, Kitagawa says PC shipments should improve for the year as a whole and blow up in 2025.
“At the worldwide level, PC demand will see more uptake toward the end of 2024 and more robust growth in 2025, when the PC refresh will be at its peak,” said Kitagawa.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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