IDC PC forecast revised downward as recovery stalls

Market research firm IDC has lowered its forecast for 2003 PC shipment growth again, citing a slower economic recovery than expected and the spread of severe acute respiratory syndrome (SARS) in Asia.

The company now expects PC shipments to grow 6.3 percent to 145.2 million units worldwide in 2003, down from the 6.9 per cent growth predicted in March. That number has been downgraded from last December's expectations of 8.3 per cent growth, which was lowered due to a drop-off in public sector spending.

"We are seeing a recovery now, it's just not a very robust recovery," vice-president of client computing for IDC, Roger Kay, said.

The public sector weakness was expected to continue in the US, but consumers were expected to pick up the slack, IDC said. PC shipments to consumers in the US were expected to grow 10.8 per cent in 2003, compared with growth of 6.5 per cent worldwide. However, IDC saw stronger corporate demand for PCs worldwide during the rest of 2003, with growth of 6.2 per cent expected. This compared with corporate shipment growth of 2.3 per cent in the US.

The corporate growth comes from the long-awaited PC upgrade cycle that corporations have been putting off amid budget concerns. In the 1990s, conventional wisdom held that corporations upgraded their PC infrastructure every three years, as processor and component technology improvements increased productivity. However, the last major PC upgrade cycle came during the preparation for the Y2K bug, and many businesses have been making do with PCs bought in 1999 or 2000.

"There's a small number of good reasons not to upgrade: It costs money, and the PCs you've got now work pretty well," Kay said. Concerns such as increasing worker productivity and rising maintenance costs were mounting as companies realised they couldn't make their older PCs last forever, he said.

Another reason that the replacement cycle is less pronounced than expected is the lack of a single event such as Y2K to motivate corporations to make PC purchases, Kay said.

Therefore, the recovery was spread out over several quarters, and less noticeable, he said.

Worldwide, unit shipments are expected to regain the losses suffered since the economic downturn began in 2000.

In 2000, 140.1 million units were shipped, according to IDC, falling to a low of 134.6 million in 2001.

The effect of SARS in China appears to be easing, but it was responsible for holding down consumer purchases as people stayed home, Kay said.

One side effect of the outbreak was a tilt toward direct Internet PC purchases in China away from retail purchases, he said. Shipments to businesses in western Europe were expected to grow 3.9 per cent, up from flat growth in the fourth quarter of 2002, IDC said.

However, in Japan, a weak consumer market for PCs was expected to result in a 1.2 per cent decline in PC shipments to Japan. Even as unit shipment growth regained some momentum, revenue was expected to decline in 2003, Kay said.

The total shipment value of PCs would decrease 2.4 per cent in 2003 as the average selling price of a PC continued to fall, he said.

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Tom Krazit

IDG News Service
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