Apple's regular series of record-setting Mac sales sprees seems to be taking a raincheck. As economic malaise ate a huge chunk of PC sales in the first quarter of 2023, the Mac maker was the worst affected of all, according to preliminary results from IDC.

Apple Mac sales decline 40.5% YoY

In its latest PC market share report, IDC confirmed a significant decline across the global PC industry. "Weak demand, excess inventory, and a worsening macroeconomic climate were all contributing factors for the precipitous drop in shipments of traditional PCs during the first quarter of 2023 (1Q23)," the analysts said.

In a miserable quarter for the entire industry, PC shipments hit 56.9 million, down 29% compared to the same quarter last year. Apple was the worst impacted, with a 40.5% year-on-year decline, IDC said. Lenovo saw a 30.3% drop, HP 24.2%, Dell 31%, and ASUS 30.3%.

Apple's Q1 2023 shipments totaled 4.1 million, for a 7.2% market share, said IDC. That's down from 8.6% market share in Q1 2022. It is worth noting, however, that while the PC industry grew just 6% over the last few years, Apple's Mac share increased 60% in that time.

End of the feeding frenzy

Apple had warned investors to anticipate weaker Mac sales. Speaking during the last financial call in February, CEO Tim Cook noted that the industry is contracting, saying, "I think it will be a little rough in the short term."

The company's chief financial officer Luca Maestri put it this way:

"For Mac and iPad, we expect revenue for both product categories to decline double digits year-over-year, because of challenging compares and macroeconomic headwinds."

The decline reflects the end of the pandemic-driven pivot to remote work, during which employers and employees scrambled to invest in the best computers they could afford. The industry now seems to be returning to pre-COVID patterns.

In fact, IDC noted, this quarter's 56.9 million PC shipment total is noticeably lower than in pre-pandemic years. The first quarter of 2019 saw 59.2 million PCs ship, while Q1 2018 reached 60.6 million, according to the firm.

"The large decline carries through all segments (consumer, education, and businesses)," said Jitesh Ubrani, research manager, worldwide mobile device trackers at IDC. "Businesses have also begun to slow PC spend as they work on navigating the tough macroeconomic climate. Forex is also a huge issue outside the US, as businesses who had planned their IT budgets last year are now realizing that their budgets simply don't go far enough due to the price hikes and weakening local currencies."

Erik Woodring, Morgan Stanley's Apple analyst, in February warned that weak consumer demand, deceleration in enterprise markets, and economic weakness have contributed to elevated channel inventories. He believes PC sales this year will hit their lowest rate since 2006.

Supply chain challenges, opportunities

IDC's estimates appeared as key Apple component suppliers Foxconn and TSMC announced their own grim quarters. Foxconn last week reported a 21% year-on-year fall in revenue in March, following an 11.65% decline in February. Foxconn Chairman Young Liu in February said: "We maintain a relatively conservative view towards the smart consumer electronics and think they might decline slightly."

TSMC revenue dropped 15%, according to Bloomberg estimates. This was the second straight quarter of decline. It was also recently reported that Apple paused TSMC's M2 processor production for a month due to lower-than-expected demand for those systems offering the chip.

If there is a silver lining in these gloomy market forecasts, it is that the decline gives manufacturers a little space to adjust their supply chains and explore production outside China.

Apple's supplier partners are already thought to be expediting deep investments in production facilities in India, Vietnam, Thailand, and elsewhere. Foxconn has invested$300 million on production in Vietnam, while placing the lion's share of its investments into new iPhone production facilities in India.

Zooming to the long view

Looking forward, a lot depends on economic recovery. "By 2024, an aging installed base will start coming up for refresh," said Linn Huang, research vice president, devices & displays at IDC, in a statement.

"If the economy is trending upwards by then, we expect significant market upside" as businesses, schools, and consumers refresh their systems, Huang said. "If recession in key markets drags on into next year, recovery could be a slog."

At time of writing, there is strong speculation that Apple will introduce the first Macs equipped with 3-nanometer M3 processors at its forthcoming Worldwide Developer's Conference in June. These will be the industry's first mass-market PCs to be equipped with 3nm processors and are expected to deliver significant power and performance improvements in comparison to existing systems.

Apple experienced a strong reaction to its M1 MacBook Pro introductions in the year-ago quarter. Following a weak Mac quarter in calendar Q4 2022, Apple introduced updated Macs with M2 chips in January 2023, but they arrived to severely dampened consumer confidence in most economies. It remains to be seen if the allure of the new M3 Macs will give Apple the momentum required to shrug off the current malaise in the short term.

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