Accelerated Transition to Mobility and Multi-Equipment Will Remain Key Engine of Growth in the French PC Market in 2H08
In line with expectations, the French PC market started the year at a healthy pace, with shipments recording 9.6% year-on-year growth in 1Q08. Strong notebook sales drove overall market dynamics, especially in the consumer and SMB space, contributing to a 30.2% rise in total portable shipments, with further momentum created by the Eee PC launch. The desktop market remained lackluster with sales declining by 9.7%, due to the sustained shift to mobility. However, corporate desktop sales showed robust 18.4% growth, reflecting healthy enterprise renewal activity.
While the current economic environment is not the most favorable, with rising concerns over international financial fluctuations and rising oil prices, IDC expects the second quarter and second half of the year to continue to be driven by the continued transition to mobility, multi-equipment purchases in the home, and declining price points across all segments, which should lead to an increase in overall PC shipments by 10.8% for 2008 over 2007.
The key engine for growth will remain around notebooks. Consumer notebook sales recorded strong performance in the first quarter, posting 28.1% growth, after a solid 50% recorded last year in 1Q07. Transition to mobility is continuing strongly with the share of notebooks to desktops rising to 67% of total PCs, up from 59% a quarter ago, boosted by accelerating multi-equipment purchases.
Increasing segmentation by usage scenarios is fuelling demand for a wider range of products, from ultraportable to transportable models. Consumers continued to opt for desktop-replacement machines, stimulating demand for transportables (17in. systems and above). IDC expects this "sofa-mobility" trend to remain buoyant, along with further price erosion. At the same time, the market should see increasing penetration of ultraportable form factors.
"The arrival of "low-cost ultraportables" and more particularly the success of Asus' Eee PC product has created not only an additional momentum in the overall notebook market, but a stronger base for ultraportable adoption in the consumer space. For the first time, ultraportables notebooks have become affordable to a wider customer base. And, in addition to the price, product design, ease of use, and the Internet-centric value proposition seemed to resonate with consumers. The Eee PC co-launch with SFR is continuing, and the telco operator is now offering Windows and Linux versions bundled with unlimited 3G connection for €349 and €249 respectively", said Nicolina Angelou, research analyst for IDC's EMEA Quarterly PC Research Group.
An increasing number of ultraportable models will hit the market in the back-to-school and Christmas season, and, coupled with telco offers, will create additional buoyancy in the consumer notebook space in 2H08, which is likely to boost portable penetration in additional lower-income or new-buyer segments, such as the senior population.
Consumer notebook shipments are forecast to display continued double-digit growth in 2008, expected at 36.5%. Several ultraportable models were announced in 2Q08, from international as well as local PC vendors - including French retailer Surcouf, which is planning to launch La Revolution, its own branded low-cost ultraportable and has already signed with Orange and SFR to bundle the machine with broadband connection. CPU vendors are also following this new segment closely, launching dedicated platforms. Intel announced its Centrino Atom platform; AMD is likely to launch a similar concept with the Bobcat CPU, probably during next year; while VIA has already unveiled its Isaiah platform.
A fiercely competitive environment, noise around ultra-low-cost mobility, traction in the telco channel, and Dell's successful entry in the retail channel have all contributed to aggressive price cuts in the first quarter of the year, and this trend is not likely to soften in 2H08. France witnessed the fastest decline in ASPs, especially in the retail area, driven further down by the success of Asus' Eee PC co-launch with SFR. ASP declines in the consumer notebook segment were even stronger than expected, reaching -26% compared to 1Q07 (versus -21% forecast).
"The arrival of new low-cost notebook models will put further pressure on already declining prices, and some vendors are likely to push entry-level prices closer to low cost", said Angelou. "Therefore IDC expects an ASP decline of over 20% in the notebook market this year", she added.
Similar to consumers, SMBs (businesses with 1-499 employees) also continue to migrate to mobile platforms, with the share of notebooks reaching 57% (versus 50% in 4Q07). The renewal of the installed base, the replacement of desktops by notebooks, and continued adoption of laptops boosted notebook growth close to 36% in 1Q08 and healthy growth is expected to be maintained over the next few quarters - adversely impacting desktop shipments, which are set to continue contracting.
Strong vendor push, targeted channel programs, and declining prices will continue to stimulate SMB demand for portables throughout the year. Moreover, the new wave of low-cost ultraportables is likely to add incremental volumes, as vendors also target mobile professionals, adding, for example, dedicated security software.
The corporate segment (businesses with more than 500 employees, or government and education institutions), recorded strong results across all form factors in the first quarter, despite fears of U.S. economic slowdown and turmoil in the financial sector. Corporate desktops displayed outstanding growth at 18.4% year on year, highlighting the expansion of enterprise refreshes. Corporate renewal activity also had a positive impact on notebook sales: however, due to higher security, easier deployment and manageability, and, therefore, overall lower cost of ownership, desktops continue to remain the key computing platform.
Economic uncertainly is leading to more cautious spending behavior in some sectors but declining price points and the need for installed base replacement in several companies should sustain corporate PC refresh activity.
The low-cost ultraportable trend will eventually hit the education market as well in the coming quarters, and will considerably improve the ratio between students and computers, as every student could have a device that is cheap, light, and small enough to carry all the time. Schools are likely to place orders for low-cost ultraportables from 2009.
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