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The laptop market is at a recovery inflection point, with AI-driven productivity entering a new growth cycle.
The laptop market is at a recovery inflection point, with AI-driven productivity entering a new growth cycle.
Summary: The laptop market is reaching a point of revival, with AI technology driving a new cycle of productivity growth. Following the demand for remote work during the pandemic, the market is stabilizing as consumers return to offices and adopt more rational spending habits. The downward trend in sales volume seen in 2023 is slowing compared to 2022, with average prices starting to rise. Upstream supply strategies have introduced high-configuration gaming laptops with better cost-performance ratios into the market. The market is showing a polarizing trend, with increasing demand for entry-level notebooks and high-end flagship models. In 2024, the laptop market is expected to enter a growth cycle driven by technological upgrades, AI capabilities, and operating system support.

From remote work to market normalization, the laptop market stabilizes after a downward trend.

During 2020-2021, the COVID-19 pandemic led to a surge in demand for remote work and online entertainment, significantly boosting the personal computer market. During this period, the demand for laptops was particularly strong, as they met the new need for working anytime, anywhere. However, as the pandemic slowed by the end of 2022 and people began returning to the office, coupled with more rational consumer spending, the demand for laptops at the retail level weakened.

Entering 2023, the PC market began to show a clear shift. According to Sandalwood's monitoring of the notebook category in the Chinese e-commerce market, although the downward trend in sales volume slowed in the third quarter of 2023, the market decline narrowed compared to the beginning of the year. Specifically, sales volume in the first quarter dropped by 3% year-over-year, followed by a further 7% decline in the second quarter. However, by the third quarter, this decrease began to narrow to 2%, indicating a gradual stabilization in market demand.

Over the past 30+ years of PC market development, from desktops to laptops and then to tablets, the market has become saturated. The natural cycle of consumers replacing their devices has become the main source of demand. According to Sandalwood's research on the lifecycle of laptop products, prolonged inventory clearance activities over a year have led to a yearly decline in the market share of new products. For instance, new products accounted for 65% of sales in 2021, but this dropped to 50% in 2022 and further to 34% in 2023. However, quarterly data shows a rebound in the market share of new products in 2023, especially in the second and third quarters, with new products nearing 50% of sales. For some brands like Lenovo and HP, new product sales exceeded 50%. After inventory levels normalized, the industry's average price began to rise, recovering to over 6000 yuan in the second quarter. Despite the easing of inventory issues, the overall demand in the personal computer market is expected to remain weak for the year. The main challenge facing the market is the uncertainty of end-market demand.

Upstream inventory strategies spur competitive cost-performance in high-configuration gaming laptops.

Inventory clearance strategies transferred to the end market have rapidly increased the share of high-configuration laptops, particularly evident in the gaming laptop market, with corresponding prices decreasing. This trend partly stems from reduced upstream costs and partly from inventory clearance strategies prompting the entry of numerous small brands with high-configuration, low-cost products into the market. Against this backdrop, major brands with high-configuration products have adopted more aggressive pricing strategies, resulting in an average price reduction exceeding 10% in sales this year.

Taking storage capacity as an example, laptops equipped with 1TB storage have become increasingly popular. Their market share significantly grew from 11% in 2022 to 38% in 2023. Concurrently, the average selling price of these products decreased from 10,994 yuan to 9,173 yuan, a decline of 17%.

In terms of processors, laptops equipped with I9 or R9 CPUs have also seen significant growth in the market. The sales share of these products increased from 6% to 25%, with prices becoming more affordable, dropping from 11,579 yuan to 10,167 yuan, a reduction of 12%.

Additionally, laptops equipped with 2.5K+ screens are favored by consumers for their higher screen resolution. Their sales share increased from 46% to 59%, with the average selling price also decreasing from 9,373 yuan to 8,706 yuan, a reduction of 7%. This reflects consumers' pursuit of higher image quality.

In terms of graphics processors, laptops equipped with RTX 60 series GPUs have performed exceptionally, with their sales share increasing from 44% to 59%. Despite limited price reductions due to upstream manufacturers' control, the change from 8,579 yuan to 8,130 yuan also indicates the intense level of market competition. Notably, high-end laptops equipped with I9 configuration and RTX 60 GPUs, along with 16GB+1TB, have seen the most significant price reduction, by 22%, indicating a continuous strong demand for high-performance products. This is accompanied by improved cost efficiency and intensified market competition. Laptops with equivalent R9 configurations have seen price reductions of 18%, while those with I7 and R7 configurations have decreased by 10% and 13% respectively.

Polarization in Price Ranges Drives Market Growth with High-End and Cost-Effective Products

In 2023, the overall growth of the market was jointly driven by more aggressive pricing strategies adopted by gaming laptop manufacturers and the super high cost-performance products offered by mid-sized and small brands from the Shenzhen region. Notably, Apple's N-1 generation products also became one of the focal points in the market. Under this backdrop, the demand for products in the lower price range showed a growing trend. Specifically, the market share for products priced below 3000 yuan increased from 8% to 10%, and for those in the 3000 to 4000 yuan range, from 12% to 14%. This trend indicates an increasing consumer demand for economical products, with this price range primarily dominated by small and unbranded products. As notebook computer channel inventory levels normalized in the second quarter, the demand for mid and low-end consumer products also increased.

The mid-to-high-end market maintained a steady growth trajectory. Within the price range exceeding 7000 yuan, the market shares for the 7000 to 9000 yuan and 9000 to 10000 yuan segments remained constant, at 17% and 4% respectively. Apple's N-1 generation products performed relatively well in this price bracket.

In the higher price range, specifically 10000 to 15000 yuan, demand rose from 4% to 5%, while the market share for products over 15000 yuan remained stable at 1%, reflecting stable and slightly growing demand in the ultra-high-end market. This trend indicates that, although the market as a whole is moving towards more rational consumption, the demand for high-end products continues to expand gradually.

In the higher price range, specifically 10000 to 15000 yuan, demand rose from 4% to 5%, while the market share for products over 15000 yuan remained stable at 1%, reflecting stable and slightly growing demand in the ultra-high-end market. This trend indicates that, although the market as a whole is moving towards more rational consumption, the demand for high-end products continues to expand gradually.

2024 Notebook Technology Update Cycle: AI-Driven Market Growth Reshaping the Market Landscape

The laptop computer market is entering a technology-driven growth cycle, propelled by three key factors: First, laptops purchased during 2020-2021 are expected to enter their upgrade cycle in 2024, driving an increase in shipments. Second, advancements in AI technology are boosting demand for high-performance chips, large-capacity storage, and high-performance graphics cards. Finally, Microsoft's plan to end support for Windows 10 in 2025 will spur a hardware upgrade cycle, and the anticipated Windows 12 operating system is expected to stimulate users to upgrade their systems or replace their devices. Although these factors carry uncertainties, they collectively bring the most anticipated boost to the industry in nearly a decade.

The development of generative AI and Large Language Models (LLMs) is transforming personal and work lifestyles, driving intelligent transformation. This involves not just software but increasingly depends on hardware development. 2023 is seen as a pivotal year for generative AI, but AI models currently focus mainly on cloud computing and hyperscale data centers. High-configuration desktops can run large AI models but at a higher cost. Looking into 2024, the development of AI-generated content (AIGC) will surely benefit PCs, the most essential productivity tools. The ability to run AI models locally not only increases the flexibility of use cases but could also reduce the load on cloud servers and lessen dependence on paid cloud-based AI models. AI PCs will completely transform user experiences in productivity, entertainment, gaming, etc., enabling efficient collaboration and communication, improving work quality, while also protecting data and privacy.

Snapdragon X Elite, the latest product in the Snapdragon 8cx Gen 3 series of notebook computer chips based on the Arm architecture, features significant performance improvements. Following Qualcomm's release of the new chip, Apple also launched the M3 series chips, continuing its leadership in the Arm-based PC field. Since 2022, the Windows operating system has begun supporting Qualcomm chips. Qualcomm aims to achieve a breakthrough in the AI PC chip market with the Snapdragon X Elite chip and increase its PC market share. Intel's new generation Core Ultra processors will be released in China on December 15. In the current competitive landscape of terminal manufacturers' brands, although traditional PC brands maintain a lead, new and crossover brands are showing rapid growth, and the market structure in the AI era could be further reshaped.

Disclaimer: The content and viewpoints expressed in this article are for reference purposes only and should not be construed as investment advice or recommendations. very investor should conduct thorough independent research and consult with professional investment advisors before making any investment decisions.
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