PC shipments will hit 176.5 million units this year - up 14.2 per cent year-on-year, analysts at IDC believe.

However, IDC also sees a new trend: consumer demand is slowing, but this is mitigated by signs of the long-awaited corporate PC upgrade cycle. Slackening consumer demand will help lower expectations for the market in the second half of 2004 and into 2005, IDC said yesterday.

IDC does believe shipment growth will exceed previous expectations. PC shipments are now expected to grow 14.2 per cent to reach 176.5 million units in 2004, an increase from IDC's earlier prediction of 13.5 per cent growth for the year.

"We think there is good news for the second half of the year. But we don't expect that to spill over into future periods," said Loren Loverde, director of IDC's Worldwide Quarterly PC Tracker.

Corporate buyers dust off their wallets

One of the best quarters for commercial PC sales in five years is responsible for the heightened expectations this year. PC shipments to business customers grew 17.2 per cent in the second quarter compared to last year, the best growth rate in that category that IDC has seen since the middle of 1999, IDC said.

Consumers had kept the PC market afloat in 2002 and 2003 as corporations held off on replacing PCs bought in 1999 amid concern over the millennium bug. Over the last few quarters those corporations have finally decided to replace their aging PCs. Consumer demand is set to decline without a compelling reason for consumers to upgrade systems they recently purchased.

While consumers grow wise to debt

IDC expects worldwide consumer growth to plunge from almost 20 per cent in the second half of 2003 to just 9 per cent in the second half of 2004. In 2005, the worldwide consumer segment is expected to grow just 8.7 per cent for the full year.

Gartner also expects PC shipment growth to shrink over the next year or so. Researchers there reduced expectations for 2004 PC shipment growth in August, saying that PC vendors and chip makers that had expected stronger-than-average growth in the second half of the year were only seeing normal seasonal growth in PC shipments.

Growth rates in the PC market will naturally shrink as the industry moves beyond the recessionary period in late 2001 and early 2002 when PC shipments declined from one year to the next, IDC said. It's difficult to sustain double-digit growth rates for an extended period of time, especially in a mature market such as PCs, it said.

"The message is not that there's no more consumer growth. It's that consumer growth has already passed through a peak recovery cycle," Loverde said.

Give them a reason

One factor that will help keep consumer demand from completely falling off will be the continued growth of portable PCs, Loverde said. Notebook growth has been much stronger than desktop growth over the past year, and even if that gap shrinks slightly there is still plenty of room for consumer growth in the notebook PC category, he said.

The PC market is stronger outside of the US, but the US still accounts for the largest portion of the PC market, dragging down the future expectations. The economic recovery in Europe has trailed that of the US and any slowdown in European demand should also follow a slowdown in US demand. However, growth in Europe will remain strong in 2004, IDC said.

Much of the future growth in the PC market will come from outside the US and Western Europe, analysts predict.