China Likely Overtook U.S. as Top PC Market for First Time

China probably overtook the U.S. as the largest personal-computer market last quarter, after three decades of American dominance in an industry pioneered by Apple Inc. (AAPL) and International Business Machines Corp. (IBM)

Personal-computer shipments in China rose 14 percent to 18.5 million units during the second quarter, the first time they surpassed the number in the U.S., where they fell 4.8 percent to 17.7 million, Bryan Ma, an analyst at research firm IDC, said in an interview today. On a full-year basis, China will likely pass the U.S. in 2012, he said.

The estimates highlight the growing importance of China’s consumers to the global economy after the country passed the U.S. in 2009 as the largest auto market. Hewlett-Packard Co. (HPQ), the world’s largest PC maker, indicated this month it may pull out of that business, while China’s Lenovo Group Ltd. (992) posted quarterly profit that almost doubled.

“This was going to happen sooner or later, just like with the car market, and the time has come,” said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute Inc. in Tokyo. “China has a huge population and their income is rising.”

The value of computer shipments in China in the second quarter was $11.9 billion, compared with $11.7 billion for the U.S., IDC’s Ma said. China accounted for 22 percent of the global PC market by shipments, a percentage point more than the U.S., he said.

HP’s Late Entry

Still, shipments in China will probably end at 72.4 million for the year, about a million shy of those in the U.S., Ma said. Next year, shipments in China will probably rise 18 percent and surpass the estimated 76.6 million units in the U.S., he said.

Hewlett-Packard, a relatively late entrant to the personal- computer market in the early 1990s, vaulted atop the industry with its 2002 acquisition of Compaq Computer Corp. Years before, Hewlett-Packard had turned down a proposal by one of its engineers to buy the design for a home computer he invented. The employee was Apple co-founder Steve Wozniak, who turned the idea into the Apple I in the mid 1970s.

Though Apple helped pioneer the market with the Apple I, IBM spread the use of the product category with the release of its first PC in 1981. Lenovo, China’s largest computer maker, bought IBM’s PC business in 2005.

Lenovo

“Our business continues to climb,” Lenovo Chairman Liu Chuanzhi said in the company’s Aug. 18 earnings statement. “Our results show that Lenovo’s acquisition of the IBM PC business has become a success. In future quarters, you will see clearly that we will take what we’ve learned from this acquisition and apply that knowledge.”

Lenovo rose 4.9 percent to HK$4.97 at close in Hong Kong.

Lenovo is now poised to benefit from both China’s rise as the largest PC market, and Hewlett-Packard’s potential exit from the industry, Henry King, a Hong Kong-based analyst at Goldman Sachs Group Inc., wrote in a report to clients today.

“We think Lenovo’s proven execution track record may help it gain more market share outside China without compromising profitability,” King wrote. “We believe it would gain potential market share from HP during the transition period.”

Tablets

Still, an increasing number of consumers in China are following a global trend of opting for Apple Inc.’s iPad and other tablet computers. Lenovo Chief Executive Officer Yang Yuanqing attributed weaker growth in the nation’s PC market to the shift to tablets, he said in February.

Lenovo has started selling new products including smartphones and tablet computers emulating rivals including Apple and Acer Inc. (2353) in the past year.

The world’s market for tablets will exceed 230 million units in 2015, compared with less than 20 million units sold last year, research firm Informa said last month.

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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