The U.K. PC market is enjoying something of a boom at the moment, spurred on by a positive economy, burgeoning consumer expenditure, and a discernable return in business confidence. This has not by any means always been the case, however. In the wake of geo-political uncertainty and the global economic downturn, PC shipments in the U.K. declined 2.2% in 2001 and only managed to recover 1.3% a year later. 2003, however, saw a reversal in fortunes with sales soaring by 13.8%.
The market continued to go from strength to strength in Q204, recording double-digit year-on-year growth for the fifth quarter running. Shipment levels exceeding 1.87 million units fueled growth of 21.4% and signaled a further acceleration in the long-awaited corporate spending rebound. Combined with another quarter of strong consumer demand, growth in Q2 2004 was at its highest level for almost four years. While SMB and consumer demand continued to fuel strong notebook growth of 24.3% year on year, it was the desktop market that was the real success story in Q2. 19.6% year-on-year growth ? three times that of Q2 2003 ? was fuelled by strong corporate demand, migration to Windows XP, and more competitive offerings in the retail channel.
The consumer PC market experienced another strong quarterly performance, characterized by a continuation of fierce competition between the retail and direct consumer channels. Strong demand continued to be fuelled by Windows XP migration and digital media offerings, with consumers seeking ever-increasing storage for music, video, and image files. Desktop shipments expanded by 8.7% year on year, while notebook shipments – driven by the growing demand for mobility – rose by 43.6% YTY. Dixons Group continued to be the key retail outlet for a handful of the top-tier vendors.
The commercial desktop market grew by 27.3% year on year. Improved business confidence resulted in the green light being given to a number of corporate infrastructure overhauls, with the need to upgrade to Windows XP Pro providing further impetus. Commercial notebook shipments expanded by 17.8% YTY ? the first time since Q2 2001 when growth has been slower than for desktops. Top-tier vendor SMB programs continued to fuel substantial demand, while the uplift in corporate activity saw an increase in the number of desktops being replaced with notebooks.
Following the acceleration in the corporate rebound experienced in Q2, desktop forecasts have been upgraded for the remainder of the year. This in turn has raised full year PC market growth expectations to 17.3% year on year. 17.1% year-on-year growth is forecast for 3Q, dropping off slightly to 16% by 4Q. With notebooks continuing to boom at double-digit growth rates, 33.5% of all PC shipments will be of the mobile form-factor this year, up from 31.5% in 2003. Mirroring activity within the economy, the U.K. PC market faces a healthy expansion this year, before dropping to a more sustainable growth-level of 9% in 2005. The outlook in terms of unit shipments for the next couple of years is positive, therefore, but the issue that will need to be addressed is the threat of declining profit margins in the face of increased commoditization and declining prices.