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Business

PC makers aim to cope with falling demand via integration

TOKYO -- Toshiba, Fujitsu and Vaio see an integration of their computer operations as a critical survival strategy as they contend with shrinking markets at home and abroad.

     The rise of smartphones and other devices has cut reliance on PCs in recent years. Sales have fallen in the last year in particular, sagging after a surge in demand ahead of April 2014. Microsoft ended support for the widely used Windows XP operating system at that time, pushing PC owners to replace their computers.

     PC shipments in Japan exceeded a brisk 15 million units in both 2013 and 2014. But some see that number tumbling below the 10 million mark this year. Global shipments peaked in 2011 at 363.8 million units, but have gradually slipped since then. That figure looks to stabilize at slightly under 300 million yen in 2015 and beyond.

     In light of the gloomy outlook, Sony in 2014 sold its PC operations to investment fund Japan Industrial Partners, spinning them off as Vaio. Fujitsu announced in October this year that it would shortly split off its own PC business. Toshiba's computer division's earnings are also faltering, a problem compounded by years of fraudulent accounting.

Changing tack

Yet the PC is far from dead. Companies and consumers alike will continue to demand notebooks and tablets for a variety of tasks. Toshiba, Fujitsu and Vaio thus aim to up their earning power and secure a slice of future demand by combining their PC businesses. 

     Integrating operations will let the companies more effectively bargain with vendors, driving down component and software prices. Buying those parts accounts for a large share of the cost of producing a standard computer. Assembly only adds around 5% to a machine's value, said an executive at one PC maker. Where a computer is made thus makes very little difference to its final price. How cheaply a company can source parts is far more important, the official said.

     Three companies -- China's Lenovo Group and U.S. makers HP and Dell -- currently account for a roughly half of global PC shipments. Integrating operations alone will not be enough to bring the three Japanese companies up to that level.

     But it will be a first step. Fujitsu and Toshiba's PCs currently command No. 2 and No. 3 market shares in Japan, and joining with Vaio would put them at No. 1. Then, with Japan as an operational base, the group can take on the world.

(Nikkei)

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