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I've been talking about the personal computer replacement cycle for several quarters now and looking at companies like Micron and Intel and others they've been talking about it as well expecting a huge refresh cycle in fact in the latest quarterly update to Wall Street investors M cron talked about the PC refreshment cycle the replacement cycle and what they expect from that what's going on with that and I wanted to elaborate on that as well well as other key product categories for micron and the industry expectations for those categories because it doesn't only matter for Micron Technology right this PC refreshment cycle matters for a lot of stocks that I'm following that you're probably also keeping an eye on including AMD Nvidia Intel Etc right they all depend on the personal computer replacement cycle for the personal computer sales industry to some degree right some more than others but they all matter so these markets that I'm going to talk about here as in the Viewpoint from Micron it's going to matter for a lot of companies not just Micron Micron Technology management team told investor ERS at their conference call uh Wednesday December 18th 2024 that the PC refreshment cycle is unfolding more gradually and we expect PC unit volume growth to be flattish in calendar 2024 slightly below our prior expectations so if you didn't know their prior expectations they had forecasted low single digit growth for PC sales in 2024 turns out PC sales are going to be relatively flat in 2024 meaning zero growth zero decline zero growth relatively flat and that's bad news for companies like Micron Technology that's partly the reason why the stock price sell off sold off following the earnings release and this is also bad news for companies like AMD which depend on PC sales for their processors and their gpus it's also bad news for Intel which relies significantly in this category so this PC refresh cycle which there was indications from several industry participants including Micron Intel and others they were forecasting low to mid single digigit growth when you look at you know all of these companies that I'm following AMD Intel Micron Etc uh they had various viewpoints ranging from low single digit digit growth to Mid singled digigit growth for PC sales in 2024 turns out almost everyone overestimated the industry for 2024 including myself um based on what I was expecting based on the inputs that I was receiving from all of these participants and the companies I was following I thought that by the second half of this year we would start to see a recovery in PC sales especially given how 20 23 and 2022 were so limited in sales they weren't robust years in PC sales so you're comparing against a very poor year and you still weren't able to demonstrate growth I'm talking about the PC industry so and the reason why most industry participants were expecting this rebound is because so many computers were purchased in 2020 and 2021 and so starting in 2024 let's say mid 2024 those computers that were bought in 2020 are now 4 years old right and if you're working uh professionally with computers for example myself I couldn't use a 4-year-old PC it wouldn't be sufficient for my needs and so I would need to upgrade and I know there's many others like myself that are using personal computers for work and depending on how heavily you're using it four-year-old computer probably doesn't have the capabilities you need in today's world and if you're not using the most upto-date technology and your competitors are using the most up-to-date technology then you're going to be at a disadvantage and the cost of a personal computer is not that high compared to the output it gives you and so all of those reasons including that you know artificial intelligence these newer PCS that are starting to come out in 2024 are enhanced with AI there was there was forecast that the growth would be much much better but it's not and so now the company's looking to 2025 and talking about AI PCS will require additional Dam content with a minimum of 16 GB of RAM expected for an entry-level PC and 24 GB and above for the higher end segments versus 12 GB for the average PC last year so the average PC last year was only 12 GB moving ahead 2025 and Beyond I wouldn't be surprised if the average PC is somewhere between 16 and 24 at about 18 gab because buyers of personal computers are going to want those AI enhancements they're going to want to Future proof their computers for at least the next couple of years and get that AI capability within so Micron now saying they expect the PC Market unit growth to be in the mid single digit percentage range next year mid single digit with growth weighted towards the second half of the calendar year again similar forecast to what they were saying for 2024 a little bit better because they were saying low single digit for 20124 2025 they're saying mid single digit and the growth weighted towards the second half of the year so it looks like this replacement cycle is pushed out and that's also what I've been expecting I was expecting the recovery to start in 2024 but I had been thinking and saying that if it doesn't happen in 2024 doesn't mean it's not going to happen it just means it's going to happen a little bit later than I initially thought 121 they're going to get old they're going to need to be replaced it's just a matter of when not if they get replaced and so mid single digit expected in 2025 I wouldn't be surprised if 2026 becomes High single digits or even low double digits in 2026 the average age of a PC remember is four to six years old that's the prime replacement cycle and so if you think about the year 2026 those computers that were bought into 2020 will be 6 years old at that time so that's about stretching it in terms of the life of the PC unless of course you're just using it for email and browsing the internet then of course you can use a computer for much longer than that right um just for browsing and email you can use computers from 10 years ago as long is that uh they're still working so interesting develop ments here for micron and the PC market in one of the main categories that the company experienced downside here in 2024 but looking ahead they do expect the recovery in 2025 and they expect that recovery to be weighted towards the second half of the calendar year so now you can make these conclusions this is the first forecast that I've seen for the PC industry in 2025 from the companies that I'm following so now I'll look to AMD and Intel and others in the industry to give their forecasts and I can kind of calibrate where I think the PC market will be in 2025 based on the expectations of these companies that I'm following in the industry
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