It is no secret that the PC business and tech industry at large is going through a bit of a rough patch. However, a new report penned by Dean McCarron of Mercury Research paints an incredibly bleak picture of the state of things. Probably the biggest bombshell is that figures show the x86 processor market has just endured “the largest on-quarter and on-year declines in our 30-year history.” Based on previously published third-party data, McCarron is also reasonably sure that the 2022 Q4 and full-year numbers represent the worst downturn in PC processor history.
The x86 processor downturn observed has been precipitated by the terrible twosome of lower demand and an inventory correction. This menacing pincer movement has resulted in 2022 unit shipments of 374 million processors (excluding ARM), a figure 21% lower than in 2021. Revenues were $65 billion, down 19 percent YoY. McCarron shines a glimmer of light in the wake of this gloom, reminding us that overall processor revenue was still higher in 2022 than any year before the 2020s began.
Another ray of light shone on AMD, with its gains in server CPU share, one of the only segments which saw some growth in Q4 2022. Also, AMD gained market share in the shrinking desktop and laptop markets. For more AMD-specific financials and sales performance data, please refer to our coverage of its Q4 and FY 2022 results. Also, Mercury shared some charts for those interested in poring over x86 CPU market shares overall and per segment. A key observation here is AMD’s overall market share growth spurt from around 23% of the x86 market in 2021 to nearly 30% in 2022.
Inventory Adjustments May Be Having a Bigger Negative Impact Than Reduced Sales
McCarron was keen to emphasize that Mercury's gloomy stats about x86 shipments through 2022 do not necessarily directly correlate with x86 PC (processors) shipments to end users. Earlier, we mentioned that the two downward driving forces were inventory adjustments and a slowing of sales – but which played the most significant part in this x86 record slump?
The Mercury Research analyst explained, "Most of the downturn in shipments is blamed on excess inventory shipping in prior quarters impacting current sales." A perfect storm is thus brewing as "CPU suppliers are also deliberately limiting shipments to help increase the rate of inventory consumption… [and] PC demand for processors is lower, and weakening macroeconomic concerns are driving PC OEMs to reduce their inventory as well."
Mercury also asserted that the trend is likely to continue through H1 2023. Its thoughts about the underlying inventory shenanigans should also be evidenced by upcoming financials from the major players in the next few months.
We have seen several big tech firms and analysts seemingly indicate that H2 2023 is going to be a turning point, an inflection point where downtrends will be broken. Again this seems to be the case with Mercury's report, and of course, we hope that there will be enough highly inspiring CPU, GPU and related technology improvements coming through in H2 2023 to ignite the PC market yet again (in addition to world peace).
