PCs to face competition from consumer electronics over holidays

Stan Beer
Monday, 18 September 2006 20:39

IT Industry - Market

PCs will have a difficult time competing for consumer wallet share this holiday season with stiff competition from the consmer electronics sector, according to a new report.

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Excess production capacity has lowered LCD panel prices, and that has dropped the prices of LCD TVs, according to a preliminary forecast by Gartner, Inc. The prices of many other consumer “lifestyle” electronics are falling as well, putting them in direct price competition with PCs.

“The battle between PCs and LCD TVs in particular is likely to be especially intense over the holiday season given that LCD TVs will almost certainly be backed by aggressive holiday marketing and even lower prices,“ said George Shiffler, research director for Gartner Dataquest’s Client Platforms research program.

“Even the latest multifunction mobile phones could pose a threat with some buyers considering the prices of these phones and accompanying service contract is increasingly on par with low-end PCs. Vista’s absence will definitely make it harder for PC vendors to maintain consumer interest in PCs without cutting prices.”

Meanwhile, Gartner still predicts double-digit PC growth in 2006 but on lower revenue.

Worldwide PC shipments are on pace to total 233.7 million units in 2006, a 10.5 percent increase from 2005, however worldwide PC revenue is expected to reach US$198.3 billion, a 2.5 percent decline.

According to the Gartner forecast, Asia Pacific (excluding Japan) PC shipments will grow 21% in 2006 – double the expected worldwide growth rate – with an average 16.6% annual growth from 2005 through to 2010.

However, the rate of growth for Australia will be much more moderate, in the mid-single digits through to 2010. In Asia Pacific, desk-based PC shipments will grow 15.2% in 2006 while mobile PC shipments will grow 42.1%.

“Unit growth will continue to be price driven for the next several quarters as PC replacement activity wanes and the battle between Intel and AMD escalates,” said Shiffler.

“Steeper PC price declines will spur unit growth in mature markets like the United States over the near term, but growth will eventually slow to mid-single digits in these markets as PC replacements fade and saturation becomes more problematic. Vista’s eventual release next year could stimulate some added growth, but we remain skeptical of Vista’s impact.”

“Steeper price declines will also drive faster growth in emerging markets,” said Mikako Kitagawa, principal analyst for Gartner Dataquest’s Client Platforms research program. “Growth should be more sustainable in these markets due to low penetration, expanding economies, and a growing number of PC ownership initiatives. Emerging markets are expected to post solid double-digit growth during the next two years.”