According to a report from Credit Suisse Group AG (NYSE:CS), Apple Inc. (NASDAQ:AAPL) will be able to manage its supply for iPhone 5 to meet the expectations. The concerns regarding short supply of display and screen are not grave, as the current production process is sufficient to deliver between 40 million and 50 million units of the iPhone 5. Also, it is quite certain that Apple Inc. (NASDAQ:AAPL) will come up with “iPad mini” in the 4 quarter, which could boost the Apple current EPS estimates by 6 percent. The iPhone maker is in a very dominant position owing to its vertically integrated structure that allows it to simultaneously address all three markets; i.e. PCs, tablets, and smartphones.
The report marks a robust demand for smartphones, driven by huge Chinese demand with Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) catering to the top end of the market. As per the reports from UMC and MediaTek the burgeoning demand for smartphones is driven by a resilient Chinese market (~24% of smartphone shipments in 2011). The report from Credit Suisse Group AG (NYSE:CS) states, we “believe that 2012 will have greater than normal seasonality with Q4 representing some 32% of full year volumes, as a result of pent-up demand ahead of new product launches (namely the iPhone 5).”
Much in contrast to the smartphone demand, PC demand continues to slide in the second half of the year. Even in the Chinese market, the demand contracted for the first time in 15 years on the back of weak macro environments and also expectations that Windows 8 may not be an imminent driver of near-term demand. According to Delta Electronics, Q3 was the worst PC quarter in a long time, owing to sliding demand, mainly due to reduced commercial spending in North America.
The continued slide in PC demand was heavily reflected on the latest quarter earnings report from Hewlett-Packard Company (NYSE:HPQ). Its revenue and volume for the PC segment was down by 10 percent on a year over year basis. The PC division for Hewlett-Packard Company (NYSE:HPQ) represented 30 percent of the revenue, but contributed only 18 percent to the operating profit. Also, the weak end market demand and high channel inventory will act as road blocks in the company growth prospects for the remaining year.
Another PC vendor, Dell Inc. (NASDAQ:DELL) is also suffering from the same illness as Hewlett-Packard Company (NYSE:HPQ). Dell Inc. (NASDAQ:DELL) has already resorted to a pruning of its PC business, which was essential after a 14 percent year on year decline in PC revenues for the quarter. Dell generates over 50% of revenues and a third of gross profits from PC sales, 70% of which is related to commercial PC sales.