(Yicai) Oct. 12 -- The global personal computer market suffered an unusually sharp decline in the first three months, which is traditionally one of its busiest periods, as rising component prices, supply-chain constraints linked to the expansion of AI data centers and other factors weighed on shipments.

Worldwide shipments of traditional PCs slumped 9.1 percent in the three months ended Sept. 30 from the previous quarter and tumbled 20.1 percent from a year earlier to 62.7 million units, according to data released by US market intelligence firm International Data Corporation on Oct. 9.

This marks the second consecutive quarter of year-on-year decline in the global PC market, with the contraction significantly steeper than in the second quarter. The third quarter typically benefits from back-to-school demand, corporate purchasing and year-end inventory build-up, which generally drive shipments above second-quarter levels. This year, however, that seasonal pattern has been disrupted.

Data released on the same day by another research institution Omdia showed a similar trend. London-based Omdia estimates that global shipments of desktops, laptops and workstations sank 21.2 percent in the third quarter from a year ago to 58.1 million units.

Most top PC manufacturers logged double-digit declines in shipments in the third quarter, according to Needham, Massachusetts-based IDC. Lenovo Group retained its position as the world’s largest PC vendor in the third quarter with a market share of 23.8 percent, but deliveries slumped 22.6 percent from a year earlier to 14.9 million units.

Hewlett-Packard’s shipments plunged 30.9 percent to 10.3 million units, the steepest drop among the top five manufacturers while Dell’s deliveries tumbled 25 percent to 7.6 million units. Omdia’s data also showed a similar trend.

Inventory Overhang

Notably, the downturn was not driven solely by weak demand. Key factors included advance purchasing and inventory stockpiling in the first six months, rising component prices and supply-chain constraints brought about by the expansion of AI data centers.

PC manufacturers and distributors brought forward purchases and built up inventories in the first half of the year to lock in supply before the anticipated increase in memory prices. This pulled forward some demand that would have otherwise occurred in the second half of the year.

IDC said distributors began to sell accumulated inventories in the third quarter, undermining the month-on-growth jump in shipments normally expected during this period.

As PC prices remain high, distributors are now concerned about holding too much inventory in a market where demand remains weak. IDC expects distributors to use promotions to reduce stock levels in the short term, but PC prices are unlikely to return to the levels seen a year ago.

Mounting Pressures

Rapidly growing demand from AI data centers for high-bandwidth memory, high-capacity dynamic random-access memory and enterprise-grade Solid-State Drives is placing additional pressure on the supply of components for consumer electronics.

Memory manufacturers are directing more capital investment and advanced production capacity toward data centers and AI server products, which offer higher product margins. This is squeezing the supply available to traditional consumer electronics such as PCs and mobile phones.

DRAM and SSDs used to account for about 15 percent of the total cost of a PC, said Ben Yeh, chief analyst at Omdia. That proportion has now risen to nearly 40 percent with prices for the relevant components more than quadrupling.

Although PC manufacturers have raised prices several times over the past few quarters, these increases have not been sufficient to fully offset the higher cost of components.

As higher component costs continue to feed through to end-user prices, the average selling price of PCs has risen significantly, partially offsetting the impact of lower shipment volumes on revenue.

At the same time, AI-server businesses are emerging as a stronger growth driver for PC manufacturers, providing an increasingly important source of expansion amid the downturn in the traditional PC market.

Editor: Kim Taylor