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CPU shortages hitting PC shipments

Intel CPU shortages and Brexit issues have combined to hit the UK PC market in the first quarter

The Intel CPU shortages have taken a toll on the PC market with the hardware segment suffering a decline in revenues in the first quarter and Brexit has been a problem in the UK consumer space.

The commercial PC markets had been holding up before the component shortages started to bite but the latest analysis of the market from Gartner and Context have made rather grim reading.

The analyst houses found that Q1 was a difficult period with some of the momentum of a relalively strong  2018 being lost as unit sales dropped.

Gartner charted a 4.6% drop year-on-year in PC shipments and Context found that sales through Western distributors was down by 2.4%.

The ongoing problems with Intel chips, which has been causing problems since last September and looks like dragging on through the first half, was the main cause of the weakness in the market.

“We saw the start of a rebound in PC shipments in mid-2018, but anticipation of a disruption by CPU shortages impacted all PC markets as vendors allocated to the higher-margin business and Chromebook segment,” said Mikako Kitagawa, senior principal analyst at Gartner.

“The supply constraints affected the vendor competitive landscape as leading vendors had better allocation of chips and also began sourcing alternative CPUs from AMD,” said Kitagawa. “The top three vendors worldwide [Lenovo, HP and Dell] were still able to increase shipments despite the supply constraint by focusing on their high-end products and taking share from small vendors that struggled to secure CPUs."

That move to higher-end products at least had the benefit of helping keep profit margins heading in the right direction.

Context also picked up on the impact that the ongoing Brexit uncertainty was having as another complication in the UK PC market.

“The general fall was exacerbated by the effects of political and economic conditions in some of countries: for instance, in the UK, where consumer confidence is low amidst Brexit-related uncertainty, consumer PC sales dropped by 17.6%”, said Marie-Christine Pygott, senior analyst at Context.

Context found that commercial PCs continued to do well with sales up across Western Europe in Q1 by 4.6% with the looming end of Windows 7 support helping drive upgrades. Notebooks climbed by 6.6%, desktops by 0.6% and mobile workstations were up by 11.3%.

Intel supply problems have seen fluctuations in distribution stock movements and the need to stock more AMD-based machines to make sure there is an alternative on offer.

As a result the share of AMD-based PCs improved by 6.7% in the commercial segment and 14.7% on the consumer side.

Intel has been coping with production constraints on its CPUs and revealed late last year that it has plans to spend an additional $1bn on increasing production to try and bring the problems to an end.

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