Market Snapshot: Computers and business equipment

This market was big business for molders for nearly 20 years, but with a mature product field, it’s becoming increasingly difficult for companies to develop new gadgets to boost sales.

Ten years ago, if other market segments were down, molders could always count on computers and business equipment to keep the presses running. A lot has happened since then. Many of the major manufacturers left for low-cost countries—first Mexico and then on to China and Singapore, among others. The market has become saturated and products have matured. Add in the current economic storm and consumers who’ve developed a hunger for newer gadgets—particularly handheld iPhones and other devices that allow Internet connectivity and other previously computer-only functions—and you’ve got a recipe for low demand in mainstream computers and business equipment.

OEM activity

Hewlett-Packard (Palo Alto, CA), the world’s largest technology company, is tied with Dell for the lead in the United States. Just two years ago, about one-third of HP’s total revenue came from the sales of personal computers, and 27% of total revenue came from its printing division. However, by the summer of 2008, HP struggled with its printing business. On May 19, the company issued its second fiscal quarter (ended April 30, 2009) report showing that net revenue for the quarter was $27.4 billion, down 3% from a year earlier and up 3% when adjusted for the effects of currency. Revenue grew 9% in the Americas to $12.1 billion.

HP’s Personal Systems Group (PSG) posted flat unit shipments “in a challenging environment,” according to the company, with PSG revenue declining 19% to $8.2 billion. Notebook revenue was down 13%; desktop revenue was down 24%; commercial client revenue dropped 22%; and consumer client revenue was down 16%.

The company’s Imaging & Printing Group (IPG) revenues declined 23% for fiscal Q2, to $5.9 billion. Supplies revenue fell 14%. Printer unit shipments decreased 27%, with commercial printer hardware down 36% and consumer printer hardware down 23%. HP expects Q3 revenue between flat and 2% down, sequentially.

To meet consumer demand for new, smaller devices, HP introduced its expanded HP Mini family of sleek, lightweight (they start at 2.33 lb) “companion PCs” such as the HP Mini 110 XP and Mi (Mobile Internet) edition designed for Internet-centric consumers. The HP Mini 110 is designed as a companion PC for small and midsize businesses and frequent business travelers. “With these new HP Minis, we’re enhancing the customer experience by adding compelling features that allow users to interact with their Mini in a fun way,” said Kevin Frost, VP and GM, consumer notebook, PSG.

Dell Inc. warned in a recent report that the slump in demand for its personal computers had yet to hit bottom, as the PC maker posted a 63% drop in quarterly profit along with a 23% decline in revenue. The Round Rock, TX company said its results were driven by weak business spending during the three months ended May 1. Its profit was also dragged down by restructuring changes.

This marks the third consecutive quarter of shrinking sales and profit at Dell. Dell had a 20% decline in laptop revenue and a 34% drop in desktop PCs for the quarter. The division that sells to large companies posted a 31% revenue slide. Overall, Dell reported earnings of just $290 million, down from $784 million a year ago. Dell’s consumer revenue of $2.8 billion was down 16% from last year despite a 12% increase in consumer PC shipments.

Lexmark International (Lexington, KY), a manufacturer of branded printers, announced its results for Q1 2009, and revenue was $944 million, down 20% compared to revenue of $1.18 billion for the same period last year. The company blamed weak global economic conditions that negatively impacted demand for both hardware and supplies.

Despite the losses, Lexmark’s chairman and CEO Paul J. Curlander noted that the company “made good progress” on its “cost- and expense-reduction initiatives.” The company introduced a significant expansion of its laser line, particularly in laser multifunction devices and color, achieved growth in its branded high-end inkjet all-in-ones, and saw “good growth” in its laser multifunction devices.

During the first quarter, Lexmark introduced nine new monochrome laser multifunction products, including the X264DN, X360, and X460 Series that “pack powerful productivity and performance into compact devices for small and medium workgroups in any size organization,” according to Lexmark. The company also announced during the first quarter an expansion of its relationship with Dell to collaborate on a broader set of printer models and related aftermarket cartridges manufactured by Lexmark and sold to customers under the Dell brand.

Another announcement was the company’s ongoing plans to consolidate manufacturing capacity and reduce costs and expenses worldwide. These include the planned closure of its inkjet cartridge manufacturing facility in Juarez, Mexico by the end of Q1 2010, as well as the continued restructuring of the company’s worldwide workforce.

What’s new in materials

What’s notable for resins in this segment is what they do not contain. Recent announcements by major computer manufacturers Dell, HP, Apple, and Intel about intentions to go bromine-free in the next two years brought out a large representation from the supply chain at last January’s IPC/Intel Halogen Free Symposium. With environmental groups continuing to target brominated flame retardants (BFRs), the IPC is yielding to pressure by announcing target deadlines for BFR removal (note that halogen-free materials are more expensive).

One major area of concern in the supply chain is connectors, which use nylon and polybutylene terephthalate (PBT) and require the addition of bromine and chlorine-based flame retardants to meet UL 94 V-0 flammability rating requirements, the IPC conference report noted. “According to a speaker from the connector industry, changing plastics in a connector product is not trivial because of varying shrink rates among substitutes,” said the report. “Mold modifications are typically required, and design changes are not uncommon, requiring product testing and requalification. While in the past, manufacturers turned to higher-cost plastic, such as liquid crystal polymers, to produce halogen-free connectors, within the past 18 months several plastic manufacturers have begun to introduce halogen-free versions of other resins, particularly nylon. These are currently being evaluated for manufacturability and performance.”

Engineered thermoplastics compounder RTP Co. (Winona, MN) was selected by laser printer OEM Samsung Electronics to upgrade color printer components and reduce operating noise. Multiple RTP wear-resistant and structural compounds were used in replacing various moving components, including the engine’s paper feeding roller, fuse gear, roller shaft, and cartridge lever.

“RTP Co. materials were selected because they incorporated advanced lubricants, which provided better lubricity and higher wear resistance, resulting in less motion noise,” says Jin-Ho Kil, sales manager at Neochem Co. Ltd., RTP’s rep in Asia. “These materials deliver a real advantage: Printers now work smoother and quieter with reduced vibration and noise emissions.”