New Normal for PCs Looks Worse Than the Old One

Layoffs, budget constraints and return to office shift complicate theory of permanent gain

     The downturn in PC sales comes after a pandemic-induced boom. Photo: PETER DASILVA/REUTERS

By guest author Dan Gallagher from the Wall Street Journal.

It has turned out to be a bad time for hybrid workers who want that extra computer. Especially for the companies making those computers.

Global PC sales saw another period of sharp double-digit declines during the first quarter, according to reports Monday by International Data Corp. and Canalys. Canalys reported that sales slid nearly 33 % year over year to about 54 million units, while IDC reported a 29 % drop, to about 57 million units. The first quarter is typically a weak one historically. But per IDC’s data, this year’s first-quarter sales of PCs fell below those from the same period in the years 2014 to 2019 leading up to the pandemic. It was also the industry’s fourth consecutive quarter of double-digit declines—a streak IDC hasn’t tracked since early 2016.

Some snapback was inevitable. The pandemic sparked a big jump in PC sales as companies and workers rushed to better equip themselves for remote work. But normal life proved slow to return, as a tight labor force gave workers the leverage to resist calls to return to the office full time. And expansion efforts—especially by deep-pocketed tech giants who believed their pandemic gains to be permanent—meant extra pay and perks for the same workers who wanted top-of-the-line gear to Zoom in from home. Apple’s Mac computers, which command much higher prices than the average PC, accounted for 10 % of global PC unit sales in 2022 after averaging 7 % annual share over the previous five years, according to IDC’s data.

But the PC industry’s normalization has come at an especially bad time. The same tech giants hiring wildly in 2021 have hit the brakes hard; tech companies have announced cuts affecting nearly 336000 workers over the last two quarters, according to tech-job tracker site TrueUp.

And the workers staying are finding budgets much less generous. Ruth Porat, chief financial officer of Google-parent Alphabet Inc., singled out equipment spending in a companywide email on March 31, according to The Wall Street Journal. “Today’s devices have a much longer lifespan and greater performance and reliability, so we have made changes to what’s available and how often it’s replaced,” she wrote. And this from a company with a net cash balance just under USD 130 billion—the highest in tech.

Wall Street has already been projecting sharp declines in the PC-related segments of HP, Dell and Lenovo this year. But the depth of the current slump raises the question of just what recovery will look like. PC’s have long been a mature market—one that averaged annual sales of about 265 million units in the five years before the pandemic. IDC, for its part, projects that annual unit sales will creep up close to the 300 million mark by 2027, which would represent average growth of about 3 % annually. Even that may require Google and its rivals to open up their pocketbooks again.

Appeared in the April 12, 2023, print edition as ‘The New Normal for PCs Looks Even Worse’.