The Flailing PC Market and New Prospects for Intel’s Skylake Processors

Intel shows big faith in Skylake and Windows 10 for PC market

Previously in this series, we discussed Intel Corporation’s (INTC) launch of its latest sixth generation processor, Skylake. Chris Walker, Intel’s VP of notebook products, stated that, globally, approximately 500 million PCs were more than five years old.

Growing trends toward smartphones and tablets, coupled with a shortage of new designs, have been cited as key reasons behind the continued sluggishness of the PC market. Intel’s Skylake processors’ salient features and technologies (see Parts 2 and 3 of this series) are likely to fuel demand in the PC market, from ultra-thin notebooks to high-end gaming devices.

Intel believes that its collaboration with Microsoft Corporation (MSFT) to enhance the Windows 10 experience on tablets, combined with Skylake’s arrival, will revive demand in the PC market.

The Flailing PC Market and New Prospects for Intel’s Skylake Processors

Worst contraction in PC market in 2Q15 since 2013

Gartner reported that global PC shipments reported a ~10% decline in 2Q15. This decline is the steepest in PC shipments since 3Q13. For fiscal 2015, PC shipments are expected to fall by 4.4%.

If we consider the IDC’s (International Data Corporation) figures, this most recent decline represents a 11.8% YoY (year-over-year) downturn. Debilitating demand and high inventory levels led to worse-than-expected PC sales in 2Q15. And so, in anticipation of the Microsoft Windows 10 release, PC replacement cycles have lengthened over the past 18 months. Increased preference towards tablets has also taken the sheen out of the PC market.

As the above chart shows, Lenovo (LNVGY) retained its top position in worldwide PC shipments in 2Q15, though it still suffered a YoY shipment fall for the first time since 3Q13. Hewlett-Packard Company (HPQ) and Dell (DELL) held the second- and third-place vendor positions in 2Q15.

In 2Q15, HP also faced a shipment fall, after five consecutive quarters of PC shipment growth. The tough business climate in the EMEA (Europe, Middle East, and Africa), Latin America, and Japan impacted overall growth, as the EMEA region generates significant revenue for technology firms.

To gain exposure to Intel, you can consider investing in the VanEck Vectors Semiconductor ETF (SMH). Intel makes up about 19% of SMH.

In the next part of this series, we’ll look at Microsoft’s and VMware’s collaboration in Project A2.