​PC price rises for some as device revenues fall for the first time

The strong dollar is the villain. It's putting pressure on vendors' bottom lines, which is already turning into price increases for users in some markets worldwide.

Device type 2014 2015 2016 2017
PC market total $193bn $178bn $179bn $177bn
Ultramobiles $51bn $48bn $50bn $51bn
Mobile phones $399bn $409bn $420bn $431bn
Total $643bn $635bn $649bn $659bn

Worldwide devices revenue by device type, 2014 to 2017. Source: Gartner, March 2015.

Worldwide device shipments may be continuing to grow overall, but combined revenues from PCs, tablets, and smartphones are set to decline this year for the first time.

The impact of that one percent fall in revenues, the first decline since Gartner started collating data on the combined market in 2010, is likely to translate into higher PC prices in some regions, according to the analyst firm.

With the dollar strengthening significantly against major international currencies, exchange rates are the principal cause of the drop in revenues. But they are not helped by a gradual decline in the PC market, slowing tablet demand, and a move by consumers to low-cost smartphones.

Gartner research director Ranjit Atwal said that, although more expensive PCs are a probable consequence of the current revenue declines in some markets, vendors of all devices across the sector are likely to feel the effect.

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"We're expecting to see price rises. If you look at HP in their financials, they said given an exchange rate shift they would have to do more than just adjust the supply chain. There's not enough in the supply chain to mitigate these exchange rates. Apple also indicated the exchange rate impact as well - so it's pretty much across the board," Atwal said.

"It's just more apparent in PCs. Tablets are slowing down anyway, and smartphones - because they're going to the lower price point - you won't see the impact. It's being masked in the other two [markets] because the dynamics are different. The PC market is much clearer."

The total global devices market is projected to climb to 2.49 billion units this year, a 2.8 percent increase on 2014. The PC market is set to decline 2.4 percent in units shipped and seven percent in end-user spending, while mobile phones will rise 3.5 percent, topped by the 4.3 percent growth of the ultramobiles category, which consists of tablets and hybrids.

It is the business sector in the euro zone that will experience a relatively high increase in PC prices of about five percent in 2015, with PC unit volumes declining by three percent.

Gartner is forecasting a rise of 10 percent by US, EMEA, and Japanese PC and tablet vendors in 2015 in certain areas of the world.

Atwal said the exchange rate impact has knocked back the PC market just as it was beginning to become more stable.

"The significance is that when you look at it from a vendor perspective, they've got to protect their margins. When they're selling in local currency, they have to increase that price to try and get more and more dollars because Dell, HP, Apple report their revenues in dollars," he said.

"So what do they do in terms of trying to protect their margins? Historically, what they might have done on the PC side is maybe let their margins slip a little bit more. Maybe the consumer would continue to purchase but further down the price curve."

Now they have little choice but to increase prices in some regions, which in turn will have a dampening effect on unit shipments.

"That's a key point. While we're saying the PC market is down 2.4 percent in units, the underlying demand in terms of how much people are paying per unit is still strong. It's not a case of a shift in demand with people buying less because of their needs. They're buying less because prices have increased," Atwal said.

Device type 2014 2015 2016 2017
Traditional PCs 277 million 253 million 244 million 236 million
Ultramobile premium 37 million 53 million 74 million 91 million
PC market total 314 million 306 million 318 million 327 million
Ultramobiles: tablets, hybrids 227 million 237 million 258 million 276 million
Mobile phones 1.88 billion 1.94 billion 2.02 billion 2.06 billion
Total 2.42 billion 2.49 billion 2.59 billion 2.66 billion

Worldwide devices shipments by device type, 2014 to 2017. Source: Gartner, March 2015

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