PC Market Share Results for 1996

by Tina Lieu

According to a survey by nomura research institute (NRI), worldwide personal computer shipments in 1996 reached 72.2 million units, a 21.7% year-on-year increase from 1995. Of this total, desktop shipments numbered 59.7 million units, up by 20.1%, while shipments of portables accounted for 12.5 million units, a growth of 29.5%. NRI attributes the greater increase in portable PC shipments to a narrowing of the desktop/laptop cost-performance gap.

PC shipments remained generally slow in the first half of 1996, due in part to overproduction at the end of 1995 and unsold inventories carried over into the new year. The pace of shipments picked up again in the latter half of '96, however, when US companies began buying new, more powerful PCs to upgrade to Microsoft Windows NT 4.0. NRI expects this trend to gain momentum through 1997, and predicts a 23% increase in worldwide PC shipments in 1997, to 88.5 million units.

Among PC makers, Compaq retained its global number one position with an 11% market share, followed by IBM (9%). Apple (5%), Packard Bell, Hewlett-Packard, NEC, and Dell (with about 4% each), and Toshiba (3%) rounded out the list of leading vendors. Especially, NEC, Toshiba, and Fujitsu each enjoyed a large increase in their global shipments, while mail order heavyweights Dell and Gateway 2000 also showed steady increases.

Profit margins take center stage
In the Japanese market, domestic PC shipments in 1996 totaled 7.6 million units, according to Dataquest (of the Gartner Group). This was a 32.7% year-on-year increase and, while not as dramatic as 1995's staggering 70.5% increase, it was still well above the world market increase, and more than double the US market increase (13.6%).

Whereas 1995 saw Japanese makers - notably NEC and Fujitsu - cutting profits to the bare bone to gain market share, a renewed focus on profit margin was evident in 1996. The emphasis was on sales of high-end PCs and high-performance portables, with the average price of a PC rising from JPY231,000 in 1995 to JPY244,000 in 1996. Overall, the Japanese PC market grew in value to JPY1.9 trillion, a 43.0% increase.

The market share for portable PCs in Japan was 31.8% in 1996, only a slight increase from 1995's 30.6% share. Dataquest notes, however, that many Japanese vendors emphasized their portable PCs, since these generally have a higher profit margin. The "street" selling price in Japan for a laptop with an 11- to 12-inch LCD screen, 32MB of RAM, 800MB to 1.2GB hard disk drive, 100-MHz to 133-MHz Pentium CPU, and 6X or 8X CD-ROM drive hovered around JPY400,000.

The evident trend among consumers to buy a high-performance portable instead of a desktop was mined by such notebook PC leaders as Sharp's Mebius and Akia's Tornado. Domestic portable PC sales, which had reached 1.75 million units in 1995, surged to 2.46 million units in 1996 (a 40.6% year-on-year increase).

Dataquest predicts 27.0% growth for the Japanese PC market in 1997, with shipments of just over 9.6 million units. Three factors fueling this market growth cited by Dataquest are the low PC diffusion rate (32% in businesses, and 17% in homes), the relatively untapped potential in low-end PC sales, and a continued interest in the Internet.

China overtakes Korea
In mid-February, International Data Corporation (IDC) released the results of a 1996 survey of PC sales in the Asia/Pacific region. IDC Japan reports PC shipments of nearly 17.0 million units in 1996 for the entire Asia/Pacific region, a growth of 32.1% from 1995 and about double the world PC market growth. IDC surmises that this strong growth is due to the relative newness of PCs to the region, price cutting by vendors, diffusion of PCs into the home, a rising level of PC recognition created by interest in the Internet, and promotion strategies by governments and vendors.

When Japan is removed from the equation, Asia/Pacific market shipments totaled just over 8.88 million units, according to IDC statistics, a 26.3% increase from the previous year. Shipments of notebook computers grew 39%, while the desktop market grew by just 25%. Server shipments also grew significantly (by 38%) to 188,500 units, an increase fueled by economic growth in the Asia/Pacific region and the adoption of LANs (local area networks) among businesses.

The fastest growing market in the Asia/Pacific region outside Japan was China, which seized the number two spot from Korea, with market growth of 38.9% and shipments of 2.1 million PCs. IDC Japan predicts continued rapid growth of the PC market in China because of its low diffusion rate (1 PC per 245 persons) and good economic growth. World PC vendors have made significant investments in China, and basic-function PCs are being sold there for less than $1,000.

China is fast becoming the next stage for a PC vendor showdown. IDC notes that world PC vendors have already recognized that China's PC market will be one of the world's most important regions, and that the current high growth of PC shipments will only accelerate. Success in China, though, will require a long-term strategy, and vendors who do not invest adequately stand to be left out when China's market really takes off.

Following behind China in market size were Korea with 1.97 million units shipped (30.4% growth) and Australia with 1.39 million units (14.8% growth). China, Korea, and Australia account for 62% of PCs shipped in the Asia/Pacific region outside Japan.

Hong Kong, which reverts to China in July, shipped 342,500 PCs in 1996, growing a slow 10.8% from 1995. IDC suggests that potential IT market investors are holding off investing until they see how the return goes. Growth in Hong Kong will remain a low 9% through the first half of 1997, but the takeover should provide a gateway into the Chinese market and revive growth in the second half of 1997.

NEC loses share but stays on top
Returning to Japan, the total number of PCs shipped in 1996 - taking into account direct sales and imported units - is estimated by IDC to be around 8.1 million units (a higher figure than the 7.6 million units estimated by Dataquest). Business purchases of PCs equaled 5.6 million units (up 41%), and accounted for a 69% share of the market.

In the continued fight for market share, NEC and Fujitsu held onto the number one and two spots, respectively, although NEC lost ground (7 percentage points) while Fujitsu gained. According to Dataquest, NEC was able to keep its inventory levels down through its "ship-to-demand system," thus avoiding the excess inventories that plagued other makers at year-end.

Apple Japan's weak growth, meanwhile, enabled IBM Japan to edge into third place. Toshiba remained in fifth place, but increased its share greatly through notebook PC sales, according to Dataquest. Toshiba's Windows 95 "Libretto" subnotebook, released in 1996, contributed significantly to this increase.

Hitachi, meanwhile, rose in the market share rankings from seventh to sixth due to good reception in the business market, where it enjoyed healthy server and notebook PC sales. Dell Computer was also noteworthy for its successful direct marketing efforts, more than doubling its 1995 level of shipments.

With continued advances in, and diffusion of, mobile computing, it will be interesting to see whether portable PCs can continue to gain in market share in 1997. The entire Asia/Pacific region, and Japan and China in particular, promises to be a hot PC market that bears watching.

Japan's 1996 domestic PC shipments
Company	Shipments (million units)	Market share	Volume growth rate
NEC	2.64	32.6%	14%
Fujitsu	1.78	21.9%	67%
IBM Japan	.93	11.4%	58%
Apple Japan	.84	10.4%	1%
Toshiba	.51	6.3%	127%
Hitachi	.32	3.9%	77%
Compaq	.28	3.4%	28%
Dell	.13	1.6%	122%
Others	.69	8.5%	93%
Total	8.10	100%	39%
Source: IDC Japan (February 1997)

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