AI PCs are hot selling, Lenovo copies Apple's strategy

AI PCs are driving the development of the entire industry chain.

Lenovo, the global leader in notebook computers, is aggressively promoting AI PCs. In addition to launching a series of new machines, it has declared the strengthening of the AI ecosystem and applications, with a goal of increasing AI applications by more than 20 times by the end of the year, reaching thousands of options. By stimulating hardware sales with a variety of software applications, Lenovo achieved a strong sales performance during the 618 promotion season. Lenovo is replicating Apple's "software drives hardware" strategy, which is expected to boost sales.

Benefiting from the positive news, Lenovo's stock price soared by more than 9% yesterday (19th), closing at HKD 12.08. It has surged for two consecutive trading days, with a cumulative increase of 12.9%, reaching a new high in more than nine years. It has not only shaken off the past "stubborn stock" title but also sounded a bullish call for the global AI PC community.

During this year's 618 promotion season, Lenovo's total online sales exceeded RMB 6.9 billion. The performance of 15 products, including notebooks, thin and light notebooks, gaming notebooks, and desktops, was very strong, greatly increasing the visibility of Lenovo's AI PCs and taking the lead in heating up market topics.

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Lenovo is taking advantage of its success and declaring the expansion of the AI ecosystem. The goal is to have thousands of AI PC-related applications by the end of the year, which is equivalent to a 20-fold increase from the current 40+ applications.

Industry insiders point out that the most concerning issues for the market about AI PCs are "where to use them?" and "how to maximize the benefits of AI?" Among many AI PC brands, Lenovo focuses on AI applications, hoping to replicate Apple's "software drives hardware" model. The goal of having thousands of applications by the end of the year is expected to greatly stimulate consumer demand, accelerate the promotion of the "AI for All" strategy to boost sales. Compal Electronics, as the main contract manufacturer, will be one of the biggest beneficiaries of Lenovo's AI PC sales boom in the new financial year.

Lenovo is actively striving to become a leader in the AI PC field, even setting a goal of having thousands of related applications. Compal Electronics, the main contract manufacturer, will also seize the opportunity to become one of the biggest beneficiaries of Lenovo's "leading AI PC wave" in the new financial year.Ritchie said that after Microsoft introduced the "world's strongest AI PC" platform, Copilot+ PC, major manufacturers such as Qualcomm, AMD, and Intel successively launched their corresponding ARM or x86 architecture processors in June to August, which is conducive to stimulating the demand for AI PC in the second half of the year. It is estimated that the penetration rate of AI PCs this year is about a single-digit percentage. With the gradual release of new AI PC products in the second half of the year, the shipment volume will be better than in the first half of the year.

Lenovo announced on April 18 the launch of the AI PC product series, which is called the "world's strongest", starting at 5999 yuan, and the first market is selected in mainland China. The new machine launch schedule is at least one quarter faster than expected.

Lenovo emphasized that in order to ensure interconnectivity between different ecosystems, it is actively establishing close cooperative relations with AI partners such as JD.com, and introducing its innovative products and solutions into the Tianxi ecosystem built by Lenovo for the AI ecological strategy.

The Tianxi personal intelligent body built into the Lenovo AI PC can establish a personal knowledge base for each owner, and the built-in AI application ecosystem can protect personal data and privacy security, meeting the intelligent needs of different scenarios.

Lenovo is accelerating the implementation of the AI for All strategy, promoting innovation and application of AI in the fields of devices, infrastructure, and solutions through new technologies, new scenarios, and new experiences, and further promoting the comprehensive upgrade of the industry.

AI PC breaks the winter and drives the entire industry chain.

According to statistics from the International Data Corporation (IDC), the global traditional PC (mainly desktops and notebooks) market shipped 59.7 million units in the first quarter of 2024, a year-on-year increase of 1.5%. This is the first time since the first quarter of 2022 that the global PC shipment growth rate has turned positive year-on-year. Measured by the same period in the first quarter, this is also the first time that PC shipments have returned to the level before the COVID-19 pandemic, even exceeding the sales volume in the first quarter of 2019 (58.5 million units).

Although the growth rate is limited, it shows that PC demand is warming up in various fields. In the future, many institutions also continue to be optimistic about the market prospects of AI PCs. Referring to the historical penetration rate of smartphones, as well as the promotion of generative AI and Windows updates, it is expected that the penetration rate of AI PCs will be higher than the historical level.

Between 2024 and 2028, the penetration rate is expected to reach 40% in five years, and by 2030, the penetration rate will further climb to 60%, with shipments exceeding 180 million units, significantly improving the computing experience.In terms of pricing, IDC forecasts that the average selling price of AI PCs will be between $800 and $1000, with the market size expected to reach $80 billion by 2027, with a penetration rate of 30% and an average selling price exceeding $900. By 2030, the market size is expected to grow to $180 billion, with a penetration rate of 60% and an average selling price of about $1000.

On the other hand, the gradual promotion and acceptance of AI PCs by the public have further driven the shipment of the upstream market.

For the upstream of AI PCs, the first to benefit will definitely be the new generation of CPUs with integrated NPU. Taking Intel's Core Ultra processor, code-named Meteor Lake, released on December 14, 2023, as an example, this is Intel's latest AI PC processor, which for the first time integrates a neural network acceleration unit (NPU), aiming to provide PCs with high-performance AI acceleration and local inference capabilities. This processor, named Meteor Lake, uses advanced 3D Foveros packaging technology and client chip design, and employs a 4nm process technology. It also integrates Intel's Arc graphics card, which can provide performance comparable to that of a discrete graphics card, and the selling price has increased compared to the previous generation: Core Ultra 7, with an average selling price of $480, which is 21.8% higher than the 14th generation i7; Core Ultra 5, with an average selling price of $356, which is 36.9% higher than the 14th generation i5.

The second to benefit is the storage industry. Overall, as the penetration rate of AIPC increases and the capacity of DRAM increases, the incremental market size is also expanding. The enhancement of AI performance is inseparable from high-performance memory chips, so as the penetration rate of AIPC increases, the demand for larger capacity and higher performance memory chips also increases. According to analysis by relevant institutions, the AI PC memory and storage market has huge potential, with an expected new scale of over $7 billion. With a penetration rate of 60%, the average selling price is $40.

In terms of price, although there are differences in the prices of DRAM with three different capacities of 4GB, 8GB, and 16GB, the overall trend is that as the penetration rate of AIPC increases, the price is also gradually rising. This indicates that in the fiercely competitive market, high-quality memory products can obtain higher prices, and the demand for high-quality products by consumers is also continuously increasing. In addition, for DRAM with the same capacity, the rise in ASP (Application-Specific Programming) prices has also driven the expansion of the incremental market. This shows that with technological progress and increased production costs, higher-performance, more customized memory products can obtain a larger market share. At the same time, the incremental market is also continuously expanding, which means that the addition of AI has activated the memory market with huge growth potential. At the same time, this also provides more development opportunities and market space for memory chip manufacturers.

Market analysis agencies generally predict that a new round of equipment updates and replacements will promote the prosperity of the entire industry chain. They continue to be optimistic about the growth trend of AI PC market penetration and predict that 2024 may become the year of the AI PC market, so investment opportunities in the industry chain should be valued. According to the research report, the rise of AI PCs will accelerate the arrival of the replacement wave, thereby driving the PC industry chain into a prosperous cycle.