Research Updates

London, 28 July 2022 – Unit sales of mobile and desktop PCs through European distributors fell sharply in Q2 2022 (by −15% and −7% year-on-year, respectively) as demand weakened, according to CONTEXT, the IT market intelligence company. 

Revenues, however, were not so badly affected, dropping only −4% for mobile computers and staying flat for desktops. As in previous quarters, revenues benefitted from a rise in average sell prices resulting from price increases and changes in the product mix.

One driver for the drop in demand is the market getting back to ‘normal’ after high sales of mobile PCs at the start of the pandemic. High inflation and energy prices, and uncertainty due to the war in Ukraine, are also weighing on both businesses and consumers, putting additional pressure on a market already in decline.

With supply challenges having improved a great deal since the start of the year, demand is, in some cases, now more important than supply. In fact, in many countries there is excess stock– especially of computers aimed at consumers, education and entry-level business buyers. Given the current economic picture, distributors are having a hard time flushing this out, even with aggressive price promotions. Although supply is improving, component shortages, Covid-related factory closures in Asia and container-ship jams are still causing problems for high-end commercial products.

Focus on notebooks

In the business segment, the general decline in notebook sales over Q2 2022 improved towards the end of the quarter. While the situation varies by country, businesses are, on the whole, increasingly nervous about the economic picture and are trying to minimise the impact of cost increases on cash flow. That means upgrading of devices is being pushed down the priority list, especially as there were many upgrades during the pandemic and many smaller businesses are still recovering from that crisis.

In the consumer market, the quarter has also been weak overall even though a push at the end  offset this to some extent. However, OECD figures suggest consumer confidence in the top five western European countries is now lower than it was at the start of 2020.

Chromebooks performed well last year at times when supply improved and education projects came through. Apple also had a strong end to 2021 and start of 2022, driven by the popularity of its M1-based products. Distributor sales of both slid in Q2 – apart from the uptick at the end of the quarter noted above. In Apple’s case, this is because of component availability issues (due to Asian factory closures) and because it is shifting some of its business away from the channel and towards direct selling. For Chrome, the steep decline is down to a dearth of the large-scale education projects that boosted sales last year in countries like the UK, Italy and Spain. Windows was, therefore, in a dominant position in Q2 with revenues not far below 2021 levels.

London, 28 June 2022 – PC revenue sales through European distributors have trended down in Q2 2022 to date due to the strength of the market last year, rising costs and geopolitical uncertainty, according to CONTEXT, the IT market intelligence company.

CONTEXT’s latest data shows revenue down −13% year-on-year in April and May for notebooks and −5% for desktops.

Falling demand

The decline in revenue across the region is the result of several factors. One is the strong baseline for sales in the same period a year ago. Over 2020 and 2021 the market was supply driven but it is now shifting to a place where demand is a more important factor. That’s not to say there are no challenges on the supply side. Logistics costs are being exacerbated by Covid lockdowns in Asia and the war in Ukraine. The feedback from our partners is that while there is still sometimes a shortage of supply for specific business product ranges, overall availability has greatly  improved - in some markets to an extent where we now have an excess of product supply.

Demand has fallen in both consumer and business segments, although the drop in the latter has been softer over recent weeks. Hybrid working is still the number one driver of business sales but it is less urgent and focused only on certain products. Meanwhile, rising energy prices and living costs are impacting consumer confidence and this market is also suffering from a certain amount of saturation. 

Country by country

Most major European countries have recorded decreases in revenue, although the extent of the decline varies. Germany is among the countries that have seen  a weak performance, and we’re hearing that OEMs there are trying to combat falling demand with aggressive pricing. In fact, Germany is the only top Western European country where the average selling price of PCs has dropped between Q1 and Q2 2022. Elsewhere, in countries like Spain, retail and SMB revenues are shrinking while corporate sales are holding up. In the UK, the decrease in revenues is less acute than in other countries due to strong commercial performance, although the consumer market here has also seen signs of softening demand. 

However, there are positives. We’re still optimistic about the PC market in the mid to long term. There’s a larger base of installed machines that will need renewal and those in some sectors, such as education, may need faster upgrades. Hybrid working in the business sector continues to drive demand for some products, and Windows 11 migration and new processor launches are also likely to have a positive impact.

London, 28 June 2022 – Anticipation of a bumper summer of events could drive growth in revenues from sales of large-format displays (LFDs) as high as 35% year-on-year in Q2, according to CONTEXT, the IT market intelligence company.

CONTEXT’s latest IT channel briefing report discusses factors that have affected sales of monitors and LFDs through European distributors, including the aftershocks of the pandemic that will continue to have an impact for the rest of the year.

Growth in the consumer market is negative for the first time in 24 months as gamers and other would-be buyers spend their money on other things, leading to a supply glut. In the coming months, rising inflation may also begin to reduce consumer demand. As offices reopen, it is the commercial market which is driving overall sales – although supply chain issues, component availability and expensive logistics costs are still pushing up prices and delaying lead times.

There is little innovation in the consumer market: higher resolutions, bigger screens and higher refresh rates account for most of the changes in new models. On the business side, manufacturers are looking at products such as USB-C docking monitors to support the new trend for hybrid working.

The numbers for Q2

The good news is that revenue from displays and LFDs is likely to grow by double digits in Q2 even with unit sales stumbling. A pessimistic forecast – based on a scenario where component shortages persist into the second half of the year, consumer demand declines significantly, lead times increase and ASPs drop as demand for gaming monitors sinks – would see unit sales of monitors decline by 6.7% year-on-year in Q2 2022 but revenue increase 14.3% over the same period. For LFDs there’s a brighter forecast: unit sales growing by 22.4% and revenue sales surging by 24.8%.

CONTEXT’s optimistic scenario assumes an increase in the availability of business products, recovering consumer demand and the product mix shifting towards more expensive models. That would see unit sales of displays grow by 1.2% year-on-year in Q2 and revenues by 22.7%. For LFDs, the positive scenario also means a tilt towards more expensive products as the impact of the pandemic reduces and the prospect of summer events encourages more investment. Should that happen, CONTEXT predicts unit sales increasing 33% and revenue growth hitting 34.9%.

London, 28 June 2022 – Anticipation of a bumper summer of events could drive growth in revenues from sales of large-format displays (LFDs) as high as 35% year-on-year in Q2, according to CONTEXT, the IT market intelligence company.

CONTEXT’s latest IT channel briefing report discusses factors that have affected sales of monitors and LFDs through European distributors, including the aftershocks of the pandemic that will continue to have an impact for the rest of the year.

Growth in the consumer market is negative for the first time in 24 months as gamers and other would-be buyers spend their money on other things, leading to a supply glut. In the coming months, rising inflation may also begin to reduce consumer demand. As offices reopen, it is the commercial market which is driving overall sales – although supply chain issues, component availability and expensive logistics costs are still pushing up prices and delaying lead times.

There is little innovation in the consumer market: higher resolutions, bigger screens and higher refresh rates account for most of the changes in new models. On the business side, manufacturers are looking at products such as USB-C docking monitors to support the new trend for hybrid working.

The numbers for Q2

The good news is that revenue from displays and LFDs is likely to grow by double digits in Q2 even with unit sales stumbling. A pessimistic forecast – based on a scenario where component shortages persist into the second half of the year, consumer demand declines significantly, lead times increase and ASPs drop as demand for gaming monitors sinks – would see unit sales of monitors decline by 6.7% year-on-year in Q2 2022 but revenue increase 14.3% over the same period. For LFDs there’s a brighter forecast: unit sales growing by 22.4% and revenue sales surging by 24.8%.

CONTEXT’s optimistic scenario assumes an increase in the availability of business products, recovering consumer demand and the product mix shifting towards more expensive models. That would see unit sales of displays grow by 1.2% year-on-year in Q2 and revenues by 22.7%. For LFDs, the positive scenario also means a tilt towards more expensive products as the impact of the pandemic reduces and the prospect of summer events encourages more investment. Should that happen, CONTEXT predicts unit sales increasing 33% and revenue growth hitting 34.9%.

London, 25 August 2022 – Unit sales of print hardware declined sharply year-on-year in Q2 2022 with lower demand, especially for consumer printers, and falling sales of entry-level and high-end business printers, according to CONTEXT, the market intelligence company.

Revenues held up a little better, due to increased Average Selling Prices (ASPs), sales of more expensive consumer models and the purchase of mid- to high-priced business devices for newly reopened offices. Both figures were very close to the forecast made in CONTEXT’s Q2 forecasting report. 

Declining ink cartridge sales led to a sharp drop (of 18%) in unit sales of consumables but a lower fall (only 7%) in revenues from this sector of the market. CONTEXT’s pessimistic-scenario forecast was spot on in terms of these revenues, although sales were significantly worse than anticipated. 

Demand is softening as life returns to ‘normal’ after the pandemic. Markets are approaching saturation, there is no longer the urgency created by the crisis, and high inflation is sapping consumer demand. However, promotions designed to reduce inventory excess are likely to support sales of consumer devices during Q4 and into the beginning of next year, according to the CONTEXT Forecasting Report Q3 2022.

Individuals and organisations are choosing products more carefully, and distributors and vendors are focusing on growing sales to businesses, particularly Small and Medium Businesses (SMBs). Although ink sales are falling, toner sales are increasing thanks to the return to the office which will be the main driver of the printer market for the rest of the year and during the first half of 2023. This return could also mean Managed Print Services are primed for a comeback over the next six to twelve months. 

The supply chain is still a key factor. While overall demand is declining slightly and supply is improving (meaning that backlogs which CONTEXT has seen building up in the last year are getting smaller), high-end multifunction business printers are still being hit by delays that are expected to last until at least the end of the year. Global shortages have left businesses competing for the same raw materials, and some key components remain in short supply. The combination of price increases, supply pressures and continuing transportation issues will not be alleviated anytime soon. 

A potential vendor shift to other go-to-market routes, including online sales (either directly or through resellers) is likely to have an impact on distributors. 

Finally, growing environmental concerns leading to public- and private-sector adoption of paperless policies are having a negative impact on the printer industry, and this will only build over the years to come.

London, 26 July 2022 – Revenues from sales of inkjet multifunction printers (MFPs) through European distributors have surged in recent weeks, but not enough to result in year-on-year growth in printer sales for Q2 2022, according to CONTEXT, the IT market intelligence company.

Although revenues from almost all types of printer were higher in May 2022 than in May 2021, overall revenues fell year-on-year in the second quarter. Higher Average Selling Prices (ASPs), and a different product mix, meant revenues dropped more slowly than unit sales. There were increased sales of high-end consumer printers and mid- and high-end business devices, the latter due partly to office re-openings.

Inkjet MFP sales have also benefited from the scarcity of certain laser printer models and revenues have stood above the 100 baseline on the CONTEXT Revenue Trend Index (RTI) since Week 25 of 2022. (The baseline is the weekly average revenue for 2021.) Supply issues that were still having an impact at the start of this year are being addressed, order backlogs are clearing and, at the same time, there is substantially increased demand from the public sector. This is good news for the market as inkjet MFPs account for over 70% of sales by volume and almost 50% by revenue. 

A4 inkjet printers have recently had a greater effect on revenues than A3 models with small businesses in particular looking for high-end consumer and business devices. As a result, this specific part of the market was above 100 on CONTEXT’s RTI in Week 26.

The recent rebound in inkjet cartridge printer sales, particularly those for multifunction devices, has been seen across most major European markets but is particularly strong in Germany and Italy. Revenues have surged in these countries since Week 22 due to solid sales of high-end consumer and business printers. As a result, printer revenues in Germany from this category are following the same trajectory as last year, significantly exceeding revenues from 2020 and standing well above 100 on CONTEXT’s RTI. The same is true in Italy thanks to distributors beginning to ship 100,000 A4 multifunction printers as part of a €55m public tender. The trend is set to continue over the coming weeks with the delivery of further batches of machines for the same project.

Consumer market reaches saturation point

The consumer market appears to be saturated: there has been a dramatic decline in unit sales of entry-level printers over recent weeks. However, consumer revenue fell at a much slower rate thanks to the price increases brought about by continuing shortages of raw materials and components and higher logistics costs, and the product mix leaning towards high-end printers.

Demand for entry-level business printers has also fallen, leading to a year-on-year revenue drop of −9% in Q2 2022. Rising sales of mid- and high-end business devices helped cushion this so revenues from business-targeted printers overall declined by just −5%.

Unit sales of consumables also fell sharply in the second quarter (down by −18%) with declining sales of ink cartridges having a major impact. Here too, revenue dropped at a much slower rate (−7%) due to increased sales of expensive toners for business laser printers. 

The Q2 2022 figures for volume sales of consumables are significantly worse than anticipated, even in the pessimistic scenario of the CONTEXT Forecasting Report - Q2 2022, although the revenue based on the same situation was exactly in line with the forecast. Conversely, when it comes to hardware, the Q2 figures for unit sales and revenues were very close to CONTEXT's optimistic forecasts.

London, 19 July 2022 – European distributor revenue from sales of enterprise infrastructure declined during Weeks 21–24 of 2022 with servers falling most, according to CONTEXT, the IT market intelligence company.

The latest CONTEXT view from the Revenue Trend Index (RTI) plots performance against a baseline where 100 represents the average four-week revenue for 2021.

It reveals that, across Europe, server, storage and networking sales over Weeks 21–24 have been trending similarly to the same period over the last two years. However, server revenues dipped around Week 19 and, as of Week 24, they sat at around 70 (-30 under the index baseline). CONTEXT  expects to see some reversal in fortunes over the coming weeks as component issues are ironed out.

The networking category has been performing well since the start of the year, even reaching 120 on the index before a more recent fall: in Week 24, the RTI  for networking was around −90 (10 below the baseline). Storage revenues, on the other hand, have been running closer to the 2021 trend. They crossed below the baseline around Week 17. 

Driven by the need for faster speeds and more bandwidth, enterprises are adopting WiFi 6 access points with gusto. Revenues from sales of these exceed those of the past two years .

Considering the top five countries as a whole, networking revenues for Weeks 21–24 are up on the same period in 2020 and just shy of 2021 figures. There were slight year-on-year falls in revenue in Germany (−5%) and the UK (−3%) but growth in France (+3%) Italy (+4%) and Spain (+2%).

In most of the top five markets, revenues from switching products have declined towards 2020 levels in recent weeks. Only in Italy are they above those in 2020 and 2021, and Spain is the only market on a growth path.

Over the past two years, Enterprise flash arrays have benefitted from growing market acceptance and maturity, leading to +23% year-on-year revenue growth in Weeks 21–24. Performance was strongest in Germany (+37%), France (+34%) and the UK (+8%), with just inched into growth in Spain (1%), leaving Italy, which recorded –11% growth, as an outlier – although we expect things there to turn around in time, as logistics and supply improve as well as faster new technology gets adopted.

London, 13 June 2022 – Revenue from sales of storage hardware through European distributors could benefit from new market trends to reach year-on-year growth of 3.2% in Q2 2022, according to the latest figures from CONTEXT, the IT market intelligence company.

CONTEXT’s latest market predictions for enterprise storage and servers take into account the optimism of vendors who have largely been addressing component availability challenges and are upbeat about the coming year. Distributors and resellers are also keen to draw attention to the potential impact of digitization projects that are now on the horizon and the transition to faster, more powerful chips.

That said, availability of offerings with improved memory configuration is still an issue, and the ongoing conflict in Ukraine may also take its toll.

Two scenarios

As always, CONTEXT has considered two possible scenarios for growth in Q2 and beyond.

In the worst-case outlook, product availability issues continue, as a result of lockdowns in China, while supply constraints remain; the war in Ukraine creates further uncertainty and cloud adoption does not translate into major sales for the sector. This scenario would lead to year-on-year decreases in sales of servers (predicted to fall by 1.1%) and storage (2.2%) in Q2 2022.

However, a more optimistic picture sees an improvement in storage array sales (thanks to newer technology and improved availability) as well as the impacts of product upgrades, refreshes and continued hybrid working overcoming that of lingering component availability issues. These conditions are likely to result in year-on-year revenue growth of 1.4% for enterprise servers and 3.2% for the storage in Q2 2022.

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