IT Supply Chain Developments and Their Impact on Buying Decisions

Al Nagar, Head of Benchmarking, KnowledgeBus, Mercato Solutions, continues his series of advisory pieces sharing recent movements and impactors within key IT product categories, to keep you abreast of the latest developments. Al has been constant in his monthly reporting on Spend Matters, helping our readers make purchasing decisions wisely. 

The end of 2015 proved an interesting time for IT buyers. The euro rose strongly against both the pound and the dollar in December, driven by lower energy prices and the European central bank’s stimulation of European manufacturing.

Highs and lows with the currency have a knock-on effect for the whole IT supply chain and can impact the end product price in a particular zone or region.

Exchange Rates

December saw the euro experience a dramatic rise against the British pound, with only a minor blip in the second week of an otherwise strong month. The euro started at 0.7026, rising quickly to 0.7211 on December 4 before a minor fall on December 7 to 0.7190. From there, it rose to 0.7256 on December 9 before dropping again on December 12 to 0.7214. The remainder of the month saw a series of increases, rising to 0.7354 on the 22nd where it stayed, before finishing the month out at 0.7367.

The trend was similar against the US dollar, although there was a series of more dramatic highs and lows mid-month. The euro rose rapidly from the initial 1.059 to 1.0903 on December 4 before experiencing a series of sharp movements from there. It lowered to 1.847 on the 7th, before rising to 1.0978 on 10th. After a few more dips and rises, it reached 1.0986 on December 15.

This was followed by a fall to 1.0837 on December 18. The rest of the month saw a continual rise, increasing to 1.0972 on December 28 before ending the month at 1.0906.

The cause of the euro’s strengthening was largely due to oil prices hitting an 11-year low. Commodities were even weaker, affecting commodity-linked currencies which then suffered against the euro.

Surprisingly, the election of a new Spanish Government without a clear mandate didn’t dent the single currency; neither did European stocks experiencing their worst December since 2002.

Phones and Tablets

December saw annual smartphone shipments fall to single-digit growth for the first time in 2015, ending the year up 9.8% to 1.43 billion units. A slowdown in the Chinese market – which has previously been powering sales – caused a slowdown in global smartphone growth according to IDC.

Plus-sized smartphones overtook smaller phones for the first time in the third quarter of last year. This meant a 21% increase in shipments to 247 million. Meanwhile, smaller phones fell by 5% to 156 million.

The demand for tablets continued to decline due to limited device functionality. Trendforce has predicted that 2016 shipments will fall another 6.1% YoY to 153.4 million units as smaller tablets, restricted to internet and entertainment, are being replaced by smartphones.

Notebooks and PCs

Notebooks and PCs suffered a difficult 2015. Worldwide PC shipments fell 10% during Q4, contributing to an overall 10.3% decline during the year compared to 2014. Despite this instability, IDC stated it was confident that the short-term decline will soon stabilise and eventually return to growth. It also predicted that the commercial adoption of Windows 10 will drive PC replacements.

This glimmer of hope was reinforced by Trendforce which predicted that notebook shipments will improve this year. After 2015’s 6.4% YoY decline to 164.4 million units, with new branded vendors including Xiaomi and Huawei entering the fray, annual shipments are expected to increase to 165 million. ABI reported a sharper 14% decline in annual notebook PC shipments to 163 million in 2015.

Premium Ultramobiles and Wearables

The worldwide wearables market soared in Q3 of 2015 as Fitbit, Apple, Xiaomi, Garmin and XTC (BBK) made the top five vendor wearables in shipment volumes and market share. According to IDC, 21 million units were shipped during Q3, up 197.6% from the 7.1 million units shipped in Q3 2014.

Lastly, the early state of the wearable market is showing clear growth, proving the smart watch category is yet to dampen interest in fitness trackers.

 

Stat of the month: The largest number of price increases happened on December 22, with 593 rises in a single day.

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