UK PC sales bounce back in 2014

Consumers' focus switched from tablets to home PCs last year, with slate sales showing their first ever decline, reports Context's Marie-Christine Pygott

2014 was a good year for the UK PC industry. After a weak performance in 2013, when commercial IT investment was low and consumer demand focused on tablets, PCs were suddenly back in demand.

According to Context data, volume sales of desktops, notebooks and PC workstations across UK distribution increased by 14 per cent year on year in 2014, with each quarter seeing a progressive improvement in the year-on-year growth rate (see graph below).

© All charts copyright Context 2015. All rights reserved.

There were a number of reasons for the rebound in PC demand, and the growth drivers behind 2014's strong performance changed in the course of the year. The first half was very much driven by business sales, after the official end of Microsoft's support of Windows XP in the spring led to a surge in XP-migration projects.

The desktops category most strongly benefited from the need to upgrade from XP. Context data shows a 27 per cent year-on-year growth in commercial desktops across UK distribution in Q114 and a 32 per cent year-on-year growth in the segment in Q2. XP migration demand started to soften at the beginning of the second half of the year, and consumer demand began to take over from the commercial segment as the primary growth driver. While consumers had focused on tablets the year before, they began to show a renewed interest in traditional PC systems in the second half of 2014, for a number of reasons.

On the one hand, while the need to migrate from XP mainly benefited business sales, it was also an incentive for more security-conscious home users to refresh their existing home PC. On the other, tablet saturation levels were on the increase, and many consumers had at this point begun to realise the limitations of their tablets and became keen to replace their ageing home PCs rather than their more recently bought tablets.

In line with this, our data shows slate tablet volumes registering their first ever quarterly year-on-year decline across UK distribution in Q314, at -23.9 per cent. The holiday season then saw an even stronger shortfall in unit sales compared with the prior-year period, of -34.9 per cent.

The strongest factor behind the shift in consumer demand was the push in low-end, aggressively priced notebooks that began to hit the shelves in Q314 and intensified in the run-up to Christmas.

Helped by Microsoft's Windows 8.1 with Bing, which provides Windows to OEMs at a much reduced price on low-cost devices; as well as by a general focus on entry-level Windows 8.1 systems and an increasing variety of Chromebooks available, consumers were offered a huge choice of clamshell laptops at affordable prices in time for the holiday season (see graph, below).

© All charts copyright Context 2015. All rights reserved.

This year is unlikely to see a repeat of 2014 in terms of PC growth across UK distribution. Last year's strongest growth drivers - XP migration demand in the commercial segment and a push in low-cost notebooks into retail - will no longer apply. XP migration has largely been completed, and upcoming changes to the usage conditions of Windows with Bing, including higher licensing costs to OEMs, will reduce the number of low-cost budget notebooks in retail.

Plus, 2015 will face a tough comparison period when it comes to year-on-year growth. Nevertheless, there are areas that are expected to see good demand as we move through 2015. These include a growing consumer interest in higher-end notebooks that feature strong enough specs for video and gaming, and rising demand for consumer AIO systems; a moderate but steady increase in the number of detachable and convertible notebooks sold; and a rise in demand for high-spec, thin and light business notebooks as these are becoming more affordable.

So while volume growth will almost certainly come down in 2015, we might see a shift towards the higher end of the PC product mix, which is good news for manufacturers and the channel.

Marie-Christine Pygott is a senior analyst at Context