SAN JOSE, Calif. PC demand started falling in emerging markets including China in mid-August and has been on the decline globally most of September, adding a major economic headache for the electronics industry to the existing U.S. financial worries, according to one market researcher.
"We won't know all the details until companies start reporting their financials, but right now I am considering cutting my fourth-quarter forecast in half," said Dean McCarron, principal of Mercury Research (Cave Creek, Ariz.), a veteran PC analyst.
McCarron had projected slightly more than eight percent growth in the PC market this fall, a relatively pessimistic figure. The end of the year is typically a high point of PC consumption worldwide.
"We may see zero to five percent growth this quarter which would be very unseasonable," he said.
McCarron bases his estimates on anecdotal reports from industry sources who said for most of September demand has slumped across Asia, Europe and the U.S. What's causing the slowdown, and why it started in China--generally seen as one of the faster growing markets--is unclear.
"I have no explanation. I've been trying to dig down into this myself," McCarron said.
During Micron Technology's quarterly earnings call Wednesday, company executives said they are anticipating softer fourth quarter PC demand than they did originally. Micron had expected modest year-to-year fourth quarter PC unit growth but now believes it will flat to up or down a few percent.
SMSC (Hauppauge, NY), a small designer of computer and embedded chips, also complained of a slowdown in a recent financial announcement. "The fiscal third quarter is usually our strongest quarter for PC products but, since late August and continuing still, we have seen a significant decline in demand for desktop and notebook PCs for commercial customers in particular," said Steven J. Bilodeau, chief executive of SMSC in a prepared statement.
"We attribute this to cutbacks in corporate spending by businesses that are being impacted by the liquidity crisis. The turmoil in the financial markets also seems to have eroded consumer confidence and reduced the normal seasonal increase in demand for our [consumer] products," he added.
Due to the reported start overseas, the PC demand problem may not be directly linked to the current mortgage debt crisis in the U.S. That is raising the specter of multiple economic blows falling in tandem.
"It's not a pretty situation," McCarron said.
Wall Streeters have already battered Apple's stock, suggestion weak demand for Macintosh computers. Others have predicted the general economic malaise will mute consumer electronics sales in the holiday season. Consumer systems have become an increasing share of overall PC sales.
A market watcher in Europe recently said he predicts overall IT sales will not be affected by the global financial woes.