The PC industry is finally on the road to recovery

The global PC market continues to gain momentum as hype around AI-enabled PCs grows and business customers start buying laptops and desktops. According to early data from market research firm IDC, the PC market grew 3%, marking the second quarter of growth after seven consecutive quarters of declines.

That’s higher than the 1.9% growth that rival Gartner showed in the quarter, but both figures point to a recovery in a sector that was crushed after sales surged early in the pandemic, depressing sales in subsequent quarters.

“Make no mistake, the PC market, like other technology markets, faces near-term challenges due to maturity and headwinds,” said Ryan Reith, IDC group vice president.

“However, two consecutive quarters of growth, combined with a lot of market hype around AI PCs and a less sexy but arguably more important commercial refresh cycle, seems to be what the PC market needed. The buzz is clearly around AI, but there is a lot happening with non-AI PC purchases to keep this mature market showing signs of positivity.”

Gartner reported that PC shipments fell as much as 30% year-over-year in the first quarter of 2023, but began to increase again in the second quarter of 2023, when the company reported that PC shipments fell 16%.

A closer look at the Windows Copilot key. (Image: Microsoft)A closer look at the Windows Copilot key. (Image: Microsoft)

A closer look at the Windows Copilot key. (Image: Microsoft) (Microsoft)

The declines marked a swift reversal from the explosive growth the PC industry experienced in the early days of the pandemic. Consumers and business customers, cooped up on their couches for months, bought new systems for working from home and for entertainment. But with so many people buying PCs at once, fewer customers needed new machines in the months that followed, causing sales to plummet.

Since then, sales have continued to rise as consumers replace the laptops and desktops they bought in early 2020.

The PC market decline has had an impact on software vendors like Microsoft (MSFT). Microsoft reported that Windows OEM sales, or sales of its Windows operating system to laptop and desktop makers, fell 39% in the second fiscal quarter of 2023.

Intel (INTC) and AMD (AMD) saw similar declines. Intel reported that revenue at its Client Computing Group, the organization responsible for selling PC chips, fell as much as 38% in the first quarter compared to the first quarter of 2022. AMD reported a 65% year-over-year decline in Client group net revenue in 2023, from $2.1 billion to $739 million.

The market shift comes as the PC industry eyes the AI ​​PC as the next growth opportunity for laptop and desktop makers. AI PCs are broadly defined as PCs equipped with specialized neural processing units.

AMD launches the first AI PC desktop chip at CES 2024. (Image: AMD)AMD launches the first AI PC desktop chip at CES 2024. (Image: AMD)

AMD launched its first AI PC desktop chip at CES 2024. (Image: AMD) (AMD)

Microsoft is marketing AI PCs that feature its Copilot technology as Copilot+PCs. It’s a mouthful, and the company’s launch hasn’t exactly gone as hoped. Microsoft initially expected to kick off its Copilot+PC push with a software feature called Recall, designed to screenshot virtually everything you do on your computer, making it easier to pick up where you left off and avoid losing your place while searching the web. But security researchers raised concerns about the app, and Microsoft was forced to pull the feature to address potential problems.

Intel, AMD and Nvidia are also jumping on the AI ​​PC push, with Intel and AMD releasing AI PC chips, and Nvidia noting that PCs with dedicated graphics chips can easily handle AI PC apps.

Qualcomm (QCOM) is also venturing into the AI ​​PC market, putting its latest PC chip in Microsoft Copilot+ PCs, including the company’s Surface Laptop and Surface Pro. The chipmaker promises the kind of performance Apple has been able to squeeze out of its MacBook Pro and MacBook Air laptops, including all-day battery life and exceptional processing power.

The AI ​​PC market is still new — Microsoft only launched its Copilot+ PCs in May — and there’s still no telling how many users will choose AI PCs specifically for their capabilities, versus how many will choose them simply because they’re the latest and greatest on the market. Still, the industry is clearly on an upward trend, and for PC makers, that’s what matters most.

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Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.

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