The global PC industry hit a snag in the third quarter as global shipments fell for the first time in three quarters – despite the hype around so-called artificial intelligence PCs and growth in the US and Japan.
According to Gartner, third-quarter PC shipments, or devices shipped to retailers for sale, fell 1.3% year over year to 62.9 million units, down from 63.8 million units in the same period in 2023 Shipments fell the most in China, with Gartner reporting a 10% drop in demand in the country as government and state-affiliated entities sought fewer desktops.
Shipments in Europe, the Middle East and Africa took a less dramatic hit than China, falling 1.5% due to a wave of events that Gartner said distracted consumers, including elections in Britain and France and sporting events such as the Olympic Games. The US, meanwhile, saw a 5.6% increase in shipments, while Japan saw double-digit growth this quarter.
Yet the PC industry is in the midst of a broader comeback after years of declines and the tremendous growth it experienced at the start of the pandemic. At the time, consumers and businesses were buying virtually as many PCs as they could get their hands on to ensure they had the resources to work and play while stuck at home for months on end.
But that boom meant that people who might have refrained from buying PCs ended up buying them sooner than they otherwise would have, boosting future sales. With so many customers equipped with new PCs, demand crumbled, leading to a prolonged slump that lasted roughly two years, including the worst decline in 17 years in 2023. The slump affected companies ranging from PC makers to Microsoft (MSFT) to chip makers Intel ( INTC ), AMD ( AMD ) and Nvidia ( NVDA ).
In the second quarter of 2023, when sales were struggling, Microsoft reported that Windows OEM sales, or sales of its Windows operating system to laptop and desktop makers, fell 39% year over year. Intel and AMD saw similar declines, with Intel reporting that first-quarter 2023 revenue for Client Computing Group, the organization responsible for PC chip sales, fell an incredible 38% compared to first-quarter 2022 .AMD reported a 65% year-over-year decline in revenue. the customer group’s net sales in 2023 from $2.1 billion to $739 million.
The decline in shipments comes as the PC industry pushes the concept of AI PCs, or computers equipped with neural processing units (NPUs) or powerful graphics cards that can run AI applications locally rather than through the cloud.
Microsoft is pushing its own version of AI PCs, which 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 “have not driven demand for PCs as buyers have yet to see their clear benefits or business value.”
Additionally, she said, the end of support for Windows 10 in 2025 did not ensure updates in areas such as China.
There’s still a lot of debate about whether AI will become a huge selling point for consumer electronics, whether PCs or smartphones. So far, Microsoft has shown off a number of potentially useful AI features for Windows 11, including the Click to Do option that gives you a context-sensitive set of options to take action on what you see on your screen.
Microsoft says you can do things like remove or blur the background in a photo, or perform a visual search with Bing, which allows the search engine to search for content based on images instead of words.
But it is not yet clear whether AI is a major selling point for consumers. Jefferies recently cut Apple’s stock valuation, saying expectations for AI-powered iPhones are exaggerated. And if that’s true, you can bet it will be the same for PCs.
Regardless of the declines in the third quarter and regardless of whether AI proves to be the kind of catalyst the industry needs, Kitagawa says PC shipments should improve for the full year and rise in 2025.
“On a global level, PC demand will increase towards the end of 2024 and see more robust growth in 2025, when PC innovation will be at its peak,” Kitagawa said.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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