It sounds strange that a company whose most popular product sells for 29% less, declares itself “cautiously optimistic.” The company is Lenovo and the product is your personal computers (PCs). The interviewee, Luca Rossi, is president of the Intelligent Devices division of this Chinese company. It sounds strange, but it is not contradictory: according to Rossi, it is the result of an unfortunate sequence that has brought down almost all the progress made by the demand for PCs during the pandemic,
During the conversation, Rossi breaks down the causes of the fluctuations experienced by the world PC market. In 2019, this industry dispatched -it is not the same as selling- 267 million units, which rose to 302 million in 2020 (12%) and peaked in 2021 with 350 million (another 14%) before entering the market. freefall.
In 2022 there were 292 million (-17%) and between last January and March, 68 million (-17%), according to IDC reports. Thus, Lenovo (and Rossi) would gladly celebrate if the previous figure prior to the pandemic were equaled at the end of the year: “We are confident that we will come out of this demand crisis better than we entered,” says the manager.
Luca Rossi is the first person in charge of a global business of 49,371 million dollars – Lenovo PCs and tablets plus Motorola mobiles – which contributes 79.68% of the company’s turnover. Year after year, Lenovo tops the chart in this industry; almost a quarter of all computers shipped to the distribution channel bear his brand. The leading trio –followed by HP and Dell– controls 59% of the world market for personal computers.
Rossi reconstructs two features of the situation. The first: PC shipments to the distribution channel –what the consultants measure– have fallen by 16.5% in 2022 and 29.1% in the first quarter of 2023. Second: the activations of new devices by of users also fall, but much less, than what an improvement in real demand can deduce.
The dialogue thus derives in an exercise of market analysis. First, the demand of individuals does not behave in the same way as that of the commercial segment (companies, administrations and education). Consumer PCs began their decline earlier until – apparently – bottoming out in the first quarter.
But the growth will not be immediate: “When you have bought a television, a refrigerator or a PC in 2020, it is unlikely that you will buy another in 2023.” The outlook is more optimistic in the commercial market, with a base whose average life is four to five years awaiting renewal. Starting in 2024, Microsoft will begin to withdraw support for its Windows 10 operating system. “It would be foolhardy for any organization to extend the life of these machines and remain unprotected,” Rossi warns.
Another associated problem is inventories. During the peak of demand, many sellers accumulated inventories that they have had to reduce at the expense of offering discounts (partly subsidized by the industry, the interviewee points out). Lenovo has calculated that inventories, at least for its brand, will be reasonable again at the beginning of the second half.
A revival of demand is predictable in 2024, but inflation and interest rates “do not help”, so little is expected of consumers. Hopes for a new cycle rest on Microsoft, which has as a rule to cut support for one version of Windows (in this case 10) to give impetus to the next (the current Windows 11). “And we must not forget – Rossi concludes – that a certain number of devices bought in haste in the worst of the pandemic are candidates for replacement during the next two yearsâ€.
