Is the premium PC market approaching critical mass?

Is the premium PC market approaching critical mass?

Technology Business Research finds that a price war is imminent in the premium PC space

The likes of Dell Technologies, HP Inc. and Lenovo have all ramped up efforts into the premium PC space, which is said to be the most coveted in the PC market due to greater profit per sale and strong customer loyalty.

This may have rejuvenated the global PC market, but as the mid-point of 2017 approaches, cracks in the façade are becoming visible, according to research firm, Technology Business Research (TBR).

According to TBR senior analyst, Jack Narcotta, declining PC average selling prices and a larger roster of stronger competitors vying for greater share of a recovering market are signals that a price war is imminent.

He mentioned that in a market where all PC vendors are prioritising profit per sale, premium PCs are the obvious choice as profit-generating machines.

“Premium devices such as Dell Technologies’ XPS, HP Inc.’s Spectre and Lenovo’s X1 Carbon notebook PCs have garnered critical acclaim and rekindled PC demand, not only for these vendors’ premium PCs but also for the midrange and entry-level models found in lower tiers of their portfolios,” he said.

Year to date through April 2017, TBR observed unit shipment growth recovering globally across all price bands, with PC revenues for most vendors climbing year-to-year after long periods of decline, and premium traditional and gaming notebooks emerging as showpiece devices on par with premium smartphones from Samsung and Apple.

TBR’s Devices and Platforms Benchmark, a quarterly examination of the customer trends influencing financial results of the 17 benchmarked vendors, showed that PC revenue in the fourth quarter of last year posted its first year-to-year increase in nearly two years, climbing 2.9 per cent from the same time last year, to US$34.6 billion.

Findings from IDC also supported this claim, with the analyst firm’s Asia Pacific Quarterly PC Tracker finding that PC shipments in Australia totalled 992,000 units in Q3 2016, a year-on-year (YoY) growth of 3.5 per cent, beating the forecast by roughly seven per cent.

TBR also found that Lenovo, Apple, HP Inc. and Dell Technologies topped as revenue leaders and benefited, to varying degrees, from premium PCs and the halo effect those devices created around their respective PC portfolios.

The segment’s success has also attracted new competitors such as Huawei, and solicited greater attention from Acer, Asus and white-box PC vendors intent on ramping up PC revenue and claiming a share of the greater PC profits, particularly in gaming markets.

However, Narcotta said while vendors aim to sustain unit shipment growth by lowering their average selling prices that fueled the recovery of leading vendors’ PC businesses, the strategy is risky.

“It could potentially erase the PC market’s short-lived revenue recovery and drive vendors’ PC businesses toward the red as they concede profit to sustain market share growth, if not force some vendors out of the business altogether,” he added.

Gartner principal analyst, Mikako Kitagawa, also recently mentioned that innovative form factors like 2-in-1s and thin and light notebooks, as well as technology improvements, such as longer battery life has caused this end of the market to grow fast, led by engaged PC users who put high priority on PCs.

“However, the market driven by PC enthusiasts is not big enough to drive overall market growth,” she said previously.

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