Rush to beat China tariffs drives PC shipments higher, but that may bode ill for rest of 2019


Shipments of personal computers grew in the spring after two consecutive quarters of decline, which could be good for the upcoming results of chip makers and PC makers, but raises questions about the second half.

Two badyzes of PC shipments in the second quarter said that PC shipments increased: Gartner Inc. reported that PC sales increased 1.5% in the quarter to 63 million units, while rival IDC reported that PC sales increased 4.7% in the quarter. IDC includes Chromebooks in its calculations, which generally account for much of the difference between the two. In the last quarter, both market research companies reported that shipments fell for the second consecutive period.

Both credited the manufacturers who gained better access to Intel Corp.'s main chips and tried to get products out of China before more fees came. The growth of the industry has been hampered by the shortage of certain Intel applications.

INTC, + 0.81%

INTC, + 0.81%

Processors, a problem that also helped Advanced Micro Devices Inc.

AMD, -2.16%

Sell ​​more chips in the last quarter. While the United States and China recently reached a truce that should prevent more tariffs from being issued, a tariff of 25% began to be charged at the end of May on many products from China, where most companies manufacture their PCs.

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"The supply for Intel processors improved significantly during the quarter, which allowed most computer suppliers to comply with old orders and at the same time send a good amount of new computers to the channels," he said in a statement. Jitesh Ubrani, badyst at IDC. "In addition, the threat of an increase in tariffs led some PC manufacturers to send a surplus of desktops and laptops, which artificially favored the PC market during the second quarter."

However, that "artificial underpinning" should be a concern rather than a reason to celebrate. Many chip makers have been waiting for a better second half of the year, amid predictions that the semiconductor slowdown has bottomed out. But if the PCs that were last shipped during the back-to-school and vacation seasons, the two best sales periods for the industry, we might see a setback the rest of the year as retailers work on that inventory.

Inventories on the shelves and online could really last if prices go up due to tariffs. Computer manufacturers are likely to have to raise prices to compensate for the additional fees they must pay for products made in China, including those of US manufacturers.

"The next phase of tariffs could have a significant impact," Gartner badyst Mikako Kitagawa said in a statement. "Most laptops and tablets are currently manufactured in China and sales of these devices in the US could face significant price increases if punitive rates are imposed and suppliers do not take quick action to respond."

In an email, Kitagawa added that some suppliers are already working to move part of China's production away to avoid tariffs. "But it takes time to change production, at this moment, there is a lot of uncertainty."

Apart from consumer PCs, the industry could be saved by the upcoming death of Windows 7. Microsoft Corp.

MSFT, + 0.40%

the plans to finalize the support for Windows 7 in January of 2020, which means that companies that have not yet moved to the new Windows 10 operating system are in a hurry to do so.

"It is unlikely that the closing sprint will generate the peak seen when Windows XP complies with its [end of service] "We are ahead of the migration with two quarters to go," said IDC badyst Linn Huang in a statement. "Even so, organizations seeking to end their migration will create new opportunities for the market in the coming quarters."

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It is not yet clear if the seemingly better-than-expected second-quarter data for PC shipments will lead to changes in estimates for US hardware manufacturers. UU HP Inc.

HPQ, + 1.26%

and Dell Technologies Inc.

DELL, + 2.28%

DELL, + 2.28%

DELL, + 2.28%

Two of the world's three largest PC makers saw their market shares grow only partially compared to Lenovo's number 1 in China. Interestingly, the two badyzes differed widely in Apple Inc.

AAPL, -0.73%

AAPL, -0.73%

With IDC reporting that Apple PC shipments grew 9.6%, while Gartner said they fell 0.2%.

When these companies report second-quarter earnings in the coming weeks, we'll find out if the increase in shipping was a blessing to their finances, and what was the right store for Apple's business. But the real question is the forecast, and what the computer and chip companies think is going to happen with their inventories and sales when we get into the important second part.

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