The scarcity of PC components – specifically CPUs and screen panels – are threatening to limit availability in the run-up to the Christmas holiday quarter as orders for notebooks keep coming thick and fast, HP execs have warned.
The problem first showed up almost two years ago when Intel stumbled in efforts to switch fabs to 14nm and 10nm manufacturing processes, and was forced to prioritise chip production to higher-margin Xeons and top-end cores.
Since then, all of the major PC makers including Lenovo and Dell competed over allocation, and suffered the double whammy of COVID-19 related factory closures in China that also slowed the flow of finished products.
"When we look at the next quarter, really the key limitation is not on the demand side, it's actually on the supply chain side," said CEO Enrique Lores, discussing his employer's Q3 numbers for the three months ended 31 July.
"Because given the demand that we see in some specific segments, we really need to find, [we] need to continue to find more components, processors, some panels to respond to the demand that we see.”
Notebooks, as we all know, flew off the shelves as the COVID-19 crisis unfolded with employees working and students studying from home. Distributors in Europe sold all the product they had in Q2, including dusty notebooks that had been sitting on the shelves for 12 months.
HP's Personal Systems Group generated $10.36bn in sales in the quarter, up 7 per cent on a year ago, and growth was all down to notebook shipments, which bounced 30 per cent to $7.304bn, around half of HP Ink's total business. Desktops were down 29 per cent to $2.221bn. Workstation revenue fell too, down 30 per cent to $428m.
CFO Steve Fieler said: "The change in mix reflects the strong demand for notebooks, mainly in Chromebooks from the educational and consumer markets respectively, as the shift to working and learning from home continues."
The Print division, historically HP's cash cow, had a tough time, with turnover falling by a fifth to $3.933bn: supplies was down 19 per cent to $2.573bn; commercial hardware was down a breathtaking 37 per cent to $732m; and consumer hardware grew 7 per cent to $628m.
Ever one to focus on the positives, Lores said: "The shift to remote work and learning drove an uptick in home printing," adding that HP is connecting its Instant Ink and managed print systems to "take advantage of the work-from-home trends". HP has started to roll out the first phase of centralised billing to customers whose staff continue to work from home.
"In Managed Print Services, July page volume was down roughly 25 per cent [year-on-year], an improvement from April, where we saw a decline of roughly 40 per cent," said Lores. "While there remains much uncertainty about the phasing and pace of recovery, this is an early indication of office usage heading in the right direction."
Revenue for the whole of HP declined to $14.294bn from $14.603bn a year earlier. It reported a pre-tax profit of $751m versus $248m. ®