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  1. Hardware
January 12, 2023

Dell PC market share declines as it looks to move away from Chinese chips

Faced with a shrinking market, Dell is also trying to move its supply chain away from China.

By Ryan Morrison

Worldwide PC shipments were down by 28.5% in the last quarter of 2022 and shipments to the Europe, Middle East and Asia (EMEA) saw a historical decline of 37.2%, new figures reveal. Dell, HP and Lenovo were the worst affected, and the news comes as Dell confirmed plans to move away from the use of Chinese-made chips in its hardware.

Dell is looking to remove all 'made in China' chips from its products by 2024 as a result of supply chain issues and US/China tensions (Photo: monticello/Shutterstock)
Dell is looking to remove all ‘made in China’ chips from its products by 2024 as a result of supply chain issues and US/China tensions. (Photo by monticello/Shutterstock)

Last year there were a total of 286.2 million PC shipments, according to Gartner, marking a 16.2% decline on 2021. The final quarter of 2022 saw the largest quarterly shipment decline since the company started tracking the PC market in the mid-1990s. This has been caused by a combination of factors including anticipation of a global recession and an excess of supply due to slowing demand, said Mikako Kitagawa, director analyst at Gartner.

The leading three vendors in the worldwide PC market remained unchanged in the fourth quarter of 2022, with Lenovo maintaining the top spot in shipments and Dell sitting in third place behind HP. However, the trio saw their year-on-year growth rate decline by at least 28%.

“The enterprise PC market is being impacted by a slowing economy,” added Kitagawa. “PC demand among enterprises began declining in the third quarter of 2022, but the market has now shifted from softness to deterioration. Enterprise buyers are extending PC lifecycles and delaying purchases, meaning the business market will likely not return to growth until 2024.”

PC demand declines across all companies

Lenovo saw more than 15,000 shipments in the last quarter of 2022, down by 28.6% on the year before, with HP and Dell experiencing similar levels of decline – HP down 29.1% and Dell 37%. All of the large PC companies saw a drop, with Apple experiencing the smallest decline at just over 10% and Acer the largest at 41.2% year-on-year.

“Even as vendors offered deep PC discounts during the holiday season in an attempt to lower inventory, consumers were not swayed to spare their money,” said Kitagawa, particularly in the US market where HP took the top spot from Dell on shipments.

The level of decline was felt worldwide, with the EMEA region experiencing a 37.2% drop in shipments in the fourth quarter of 2022. This, says Kitagawa, was due to the intersection of political unrest, inflationary pressures, interest rate increases and a pending recession.

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“A decline of this magnitude only happens when market demand effectively comes to a halt,” she said. “Business and consumer confidence across EMEA has collapsed, leading to a huge drop in PC demand. A massive increase in inventory has also severely limited sell-in opportunities as sellers focus on moving old stock.”

Asia Pacific excluding Japan dropped by 29.4% year-on-year due to a shrinking Chinese market and budget cuts by the Chinese government. Uncertainty around changing Covid-19 policies also led to a drop in PC demand.

The pandemic was a major factor across the board, in part due to the PC market collapse after a major boom during lockdown as people began working from home and companies invested in new hardware for remote workers.

“Total PC shipments in 2022 were close to pre-Covid levels, with 2019 shipments well below 300 million units,” said Kitagawa. “The PC industry experienced very unusual ups and downs over the past 11 years.  After the extraordinary growth period between 2020 and 2021 due to the pandemic, the market has clearly begun a downward trend which will continue until the beginning of 2024.”

Dell looks to remove Chinese chips

Supply chain uncertainty in China, US government sanctions on the country and recessionary pressures are leading to some companies taking a fresh look at where they source components. Dell is reportedly looking to end the use of “made-in-China” chips.

The US computer manufacturer has apparently told its suppliers to significantly reduce the number of Chinese components in its products to better diversify its own supply chain over risks of increasing tensions between the US government and Beijing.

One person with knowledge of the matter told the FT that: “The goal is quite aggressive. The determined shift involves not only those chips that are currently made by Chinese chipmakers but also at the facilities in China of non-Chinese suppliers.”

It isn't just Dell making this move. Reports suggest HP is considering the option of moving to suppliers producing chips outside of China as a result of the increasing tensions.

“We continuously explore supply chain diversification across the globe that makes sense for our customers and our business,” Dell told Asia Nikkei.

Ranjit Atwal, senior director analyst at Gartner told Tech Monitor: "At least this way Dell are in control of moving out of China, rather than forced out by government policy. This needs to play out to understand the impact of Dell and other providers."

Read more: Dell still hedging bets on cloud versus on-premise

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