Despite strong demand for computers, US production will continue to plummet
Los Angeles, CA (PRWEB) August 14, 2012
The Computer Manufacturing industry is being rapidly supplanted by imports, particularly from China. "While import penetration in this industry stood at 50.7% in 2007, imports are expected to satisfy an estimated 68.6% of domestic demand in 2012," says IBISWorld industry analyst Andrew Krabeepetcharat. As a result of offshoring by US-based companies and increased competition from international firms, domestic manufacturing activity has declined. Over the five years to 2012, industry revenue is expected to fall at an average annual rate of 5.1% to $36.8 billion, including a drop of 11.1% in 2012 alone.
The industry's woes cannot be blamed on a lack of demand. In fact, the share of US households that owns at least one computer increased by 7.5 percentage points from 2007 to 2012. While demand has grown, fierce competition and widespread product homogeneity (the result of computers being assembled from standardized components) have led to falling prices and profit margins. According to Krabeepetcharat, "Computer and peripheral equipment prices fell from 2007 to 2012, and as a result, personal computer (PC) sales are estimated to generate razor-thin margins of 1.0% in 2012." Fortunately, PCs are not the only products in this industry, and industry profit, which includes computers and more profitable products, is expected to account for 3.8% of revenue in 2012.
The Computer Manufacturing industry is highly concentrated, with the four largest companies controlling a vast majority of industry revenue. Major players have been extremely aggressive in acquisitions during the past five years, and IBISWorld expects further concentration of industry revenue in the future as these acquisitions continue. Currently, Hewlett-Packard (HP) and Dell are the largest US-based computer manufacturers. Competition from abroad has tightened profit margins and prices on mass-market computer systems. Consequently, most of the industry's largest players operate in several related industries to diversify their revenue sources, with a particular emphasis on the highly profitable enterprise segment and Information Technology (IT) services. Trouble for manufacturers arose from Apple's introduction of a product that has cannibalized its own laptop market. The iPad, which sold three million units in just 80 days after launching in June 2010, proved tablet computing's viability. Because of the rising demand for the iPad, other computer manufacturers have developed their own tablets, which are gaining popularity. IBISWorld expects the mobile computing segment of this industry will expand; however, tablets will cut into industry revenue since they are manufactured abroad and are a competing force to domestic computer manufacturing.
While the emergence of new products and services will boost industry performance, US manufacturers are not expected to produce the required hardware. Major manufacturers make computers abroad to take advantage of lower labor costs and be close to semiconductor manufacturers, which produce essential computer components. As the level of standardization and price competition increase, industry revenue and profit margins will continue to feel downward pressure. Consequently, IBISWorld projects that revenue will fall over the five years to 2017.
For more information, visit IBISWorld’s Computer Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures and/or assembles personal computers (PCs), laptops and servers. Operators typically purchase computer components (e.g. motherboards and graphics cards) from dedicated manufacturers in other industries (IBISWorld report 33441a, Semiconductor and Circuit Manufacturing). This industry does not include tablet computers, nor does it include manufacturers of computer monitors, mice, keyboards and printers (IBISWorld report 33411b, Computer Peripheral Manufacturing).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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