If there was still any doubt that events have taken a definite turn for the worse for PC makers since the end of last year, February revenue numbers from the world’s biggest contract manufacturers should put them to rest.
Hon Hai, maker of Apple products (and also desktops for Dell), saw revenues fall by 18 per cent month-on-month. Taiwan’s Compal and Quanta, the top two contract notebook makers, saw revenues decline by 18 per cent and 22 per cent, respectively, compared to January. All came in well below analysts’ expectations.
This roughly 20 per cent decline applied pretty much across the board for PC contract manufacturers and represented the worst February over the past six years, according to Ticonderoga Securities analyst Brian White.
There are a number of reasons for this. February is Chinese New Year so there has traditionally been a sales drop-off from Janurary to February as the vast majority of notebook ODM companies are Taiwanese with factories in China.
Another temporary distortion was caused by problems with Intel’s Sandy Bridge chipset , whose full impact we are now seeing reverberating through the supply chain. There was also uncertainty in February over what impact iPad 2′s launch on March 2 would have on consumer sentiment for notebook PCs.
More broadly, however, what the dismal February number highlights is the continued weakness in consumer demand. That this was happening in US and Europe was already well-known, but even China was not immune.
In the fourth quarter of last year, PC sales in China declined nearly 10 per cent compared to the third quarter and grew only 2.8 per cent year over year, according to Gartner. This month the research consultancy cut its forecast for China PC sales growth this year from 18.7 per cent to 11.6 per cent.
While corporate purchases were on track, “it was consumers who suddenly started to delay spending,” said Annette Jump, research director at Gartner.
Tracy Tsai, principal analyst at Gartner, said uncertainty in the face of Beijing’s efforts to cool the economy made gave many Chinese shoppers pause. “It doesn’t mean that the users don’t have the budget, but they are more conservative in their spending,” she said.
The silver lining is that, with orders being pushed back because of Sandy Bridge, sales are likely to rebound in March. Grace Chen, analyst at Morgan Stanley, expects shipments from the top notebook contract manufacturers to grow by 50 per cent in March compared to February.
Still, she says: “We expect all [notebook contract manufacturers] to report weak 1Q results due to margin pressure and smaller scale.”