Predicting the market for any consumer product can be a tall order, and this most recent quarter for CPU sales has been a rather perfect example. Data released by Mercury Research showed that consumer spending in Q4 didn’t reach the heights CPU producers like Intel and AMD were expecting.
The numbers were still shocking, just in the opposite direction! Today, we are going to break down this study and see what could be driving CPU sales to hit 30-year lows this past quarter. Let’s get started.
Intel and AMD CPU Flop
Intel and AMD are two of the largest CPU makers in the world, both by production and market cap. Both companies have to try and predict market trends when creating a supply, but this can be challenging as there are many factors that can influence demand.
Quarter four of 2022, for example, started with both companies unveiling their new platforms loaded with next-gen features and blazing performance. On top of the new release, they seemed to assume that many people could not upgrade their PCs during the pandemic, and with that period finally coming to a close, all the requirements for a massive holiday season sale were in place…
However, predicting market trends is not an exact science and sometimes even the best-laid plans can go awry. Despite their best efforts to anticipate demand, it seems that the holiday sales period did not live up to expectations for Intel and AMD. In fact, Q4 2022 saw the biggest shipment decline in the industry in the past 30 years.
Why the Change?
Well, it isn’t an exact science, but it probably has to do with changing consumer needs and a misprediction of how post-pandemic sales would play out. During the pandemic, the world of work was turned upside down. As people were forced to stay at home, many aspects of daily life changed.
One of these changes was a dramatic increase in computer needs. As offices closed and people began working from home, the personal computer experienced a huge revival. Workers needed new PCs for Zooming, Slacking, and Teaming.
Students also needed computers for remote learning. This led to a surge in demand for desktops, laptops, and web cameras. But it wasn’t just work and school that drove the increase in computer needs. With people stuck at home, many turned to their computers for entertainment and social connection. Online gaming and streaming services saw a huge increase in usage as people sought ways to pass the time.
We aren’t in the same world state anymore, and people’s needs are shifting a bit. Also, computers are good for a little while, even if they aren’t top-performing. When people bought computers over the past 2-3 years, it was the one they were planning on using for the next 3-5 years.
The Data Seems to Match
Looking at the most recent Q4 data in comparison to the last three years shows us one story. But, in reality, CPU sales are still up when compared to pre-pandemic quarters of the same time. It was a seemingly inevitable outcome, but one that CPU makers aren’t especially happy about.
The CEOs of both AMD and Intel seem to be aware of the slowing need and aren’t especially concerned, at least from how they are addressing things, primarily the undershipment of products.
And as we highlighted…strong usage and installed base, which is roughly 10% higher than pre-COVID levels and… We remain clear eyed on managing to near-term weakness in PCs, but we also see the enduring and increasing value PCs have in our daily lives.Intel CEO Pat Gelsinger
Essentially, Gelsinger is saying here that the total addressable market is a bit smaller now than it was pre-pandemic and many people are already using Intel products. Still, they know that the near-term is likely to remain in a similar state. There is, and will continue to be, a strong need for PCs in people’s personal and work lives.
What Does This Mean?
For consumers, this is probably a good thing. Looking at the charts provided by PC Parts Picker, we can clearly see that the average price for most of the popular CPUs has been steadily dropping over the past 18 months.
With less demand come lower prices, as the economic principle states, anyways. For consumers looking to get a new CPU or build one themselves, it may be a good idea to start looking before demand really kicks up again!
The image featured at the top of this post is ©GrAl/Shutterstock.com.