PC sales uncertainty result in supply chain reductions

PC sales uncertainty result in supply chain reductions

Summary: PC distributors and ODMs are keeping inventories low as a result of falling PC shipments as consumers are turning to smartphones and tablets.

TOPICS: Hardware

Within the poor PC market, amidst a never-ending stream of gloomy predictions from analysts and pundits, computer manufacturers and distributors are working hard to keep their inventories to a minimum, according to the latest briefing by analytics provider IHS.

See also: Building a sub-$300 PC (May 2013 edition)

Of all the players in the huge PC supply chain, PC distributors themselves hold the smallest inventories, carrying as little as 30 days' worth of stockpiles during the fourth quarter, and these mostly consisted of fully built computer systems awaiting sale.

Closely following the PC distributors are the original design manufacturers (ODMs), who were carrying only 32 days of inventory of PCs.

"ODMs and distributors are striving to keep a minimal amount of computers in stock, partly because once-dominant PCs have now been upstaged in the minds of consumers by mobile devices like smartphones and tablets," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. "Global PC shipments fell last year for the first time in 10 years, while shipments of smartphones and tablets continued to boom. Because of this, companies are attempting to minimize future risk by keeping inventories of unsold products at low levels."

But it's not just to mitigate risk that is causing PC distributors and ODMs to keep inventories low. The PC market is traditionally a market where inventories are kept low because the rapid progress of technology gives PCs a short shelf life.

During the fourth quarter, it was the semiconductor suppliers, which held the greatest amount of stockpiles, estimated by IHS to be in the region of 85 days on average. And the stronger the market share of the semiconductor supplier, the more comfortable they are in holding more days of inventory.

Semiconductor manufacturers can keep higher levels of inventory — in the form of raw materials, works in progress, and finished goods — because these items are much cheaper in absolute terms, compared to the products being made using them further down the supply chain. Having an ample supply of raw materials means that semiconductor manufacturers can be more responsive to the needs of their clients.

Topic: Hardware

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  • Its all Microsofts fault

    That usless Windows 8 Metro UI has caused this mess. People take one look at Windows 8 and turn their heads and walk away wondering what the heck is up..............
    Over and Out
    • The blame game?

      Yes, blame this on Microsoft because you don't like Microsoft. That always makes sense and fixes things at the OEMs headquarters.
      NoMore MicrosoftEver
  • Inventory Control

    Most end point manufacturers and retailers like low inventories because inventory is money already spent. If the units do not sell they must discount them to move them, possibly at a net loss. If you keep inventory in control then your sales are strategic (done for reason - to get market share, etc) and not inventory clearance and your balance sheet is in better shape.

    Walmart and Target have been doing this for years among retailers.
  • Sure you want to admit to this?

    You just finished convincing us that nearly every Windows 8 license is sitting unused on a shelf. Now you are telling us that those same shelves are empty. Which is it?
  • PC inventory low and yet 100 million Win 8 license sold

    This excludes volume licensing...

    Interesting conundrum for the bloggers who bash Windows 8, claiming that sales are fake...
    • OwlllllNet PC inventory low yet Microsoft CLAIMS a 100 million liences SOLD

      Interesting conundrum for the bloggers who worship Windows 8, claiming that sales are even more and yet
      NO one sees any pick up in retail sales...
      Over and Out
  • Which is no longer the case . . .

    "The PC market is traditionally a market where inventories are kept low because the rapid progress of technology gives PCs a short shelf life."

    Which is no longer the case. Progress is slowing down because (a) the software doesn't need it and (2) heat/power problems. People are keeping their PCs longer.

    The installed base is still good - this talk about being "displaced" is untrue. It more along the lines of being a maturing market, rather than being a displaced market.
  • Good Time To Short Microsoft Stock

    The tailspin in PC sales has now become painfully apparent to everybody, it seems, but Microsoft. It has succeeded in stuffing the channel full of copies of Windows to make its books look good this quarter. But that can't continue into the next quarter. Reality has to catch up sometime soon.
  • ZDNet and its bloggers are out of touch with the everyday world out there,

    where, if the bloggers had been paying attention, inventory levels at most retailers are also being reduced, since sales of just about everything is slowing down. So, if clothing and shoes and food and autos and construction materials, are experiencing a slowdown in sales, is it because people don't like Windows 8, or don't like Microsoft, or don't like the PC OEMs?

    When are the tech sites going to start relating the slowdown of PC sales to the general slowdown in the overall economy? The reports and predictions being made at tech sites, are completely divorced from reality. Heck, even the tablets and smartphones sales have had a slowdown in sales, yet, who is predicting a post-tablet or post-smartphone world?
    • Re: sales of just about everything is slowing down

      Android and other mobile devices are still growing, though. Which points the finger pretty firmly at Microsoft's inability to get a piece of this new pie.