IDC cuts IT spending forecast on mobile slump, emerging market uncertainty

Economic uncertainty in China and Europe due to the Ukraine crisis are 'wild cards'

A slowdown in the growth rate for tablet and mobile phone sales and economic uncertainty in emerging markets are putting a damper on global IT spending, according to IDC.

Worldwide IT spending will increase 4.1 percent in constant currency this year, to US$3.7 trillion IDC said Friday. That's down from last year's 4.5 percent growth and from IDC's prior forecast of 4.6 percent growth.

The move to cloud technology and pent-up demand to replace old servers, storage and network gear provides a solid foundation for IT spending, according to IDC. Especially in the latter half of the year, enterprises may end up doing some catch-up spending to replace old equipment.

But "wild cards" in the economy for Europe and Asia, an erosion of mobile phone prices and a slowdown in the tablet market caused IDC to cut expectations for IT spending for the year.

Part of the problem is that it is difficult for smartphone and tablet vendors to maintain the extraordinary sales growth they have experienced over the past few years.

"As smartphone growth continues to cool from the phenomenal expansion of the past few years, tablet shipments have performed weaker than expected over the past couple of quarters," said Stephen Minton, vice president in IDC's Global Technology & Industry Research Organization, in a statement.

In March, IDC forecast the total tablet market, including tablets and 2-in-1 devices, to grow 19.4 percent in 2014, down from a growth rate of 51.6 percent last year. IDC also said earlier this year that worldwide smartphone shipments would be 1.2 billion units -- that's a 19.3 percent jump over last year, but represents a much smaller increase in percent terms than 2013's 39.2 percent rise.

Otherwise, the crisis in Ukraine has provoked a sense of uncertainty in Europe, and IDC expects IT spending in Russia to decline by almost 1 percent this year. The slowdown in Russia will have an impact on other countries in the region, IDC said.

Read more: Shrinking ICT budgets pose challenges for education sector: IDC

In Asia, "China remains a wild card," IDC said in its report. Demand for IT spending after the slowdown of 2013 could help buoy IT spending in the country. However, IDC noted that some economists are forecasting that Chinese GDP growth could slump below 7 percent in 2014 and 2015.

Based on exchange rates in the first quarter, the 4.1 percent growth in constant currency terms translates to just 3.4 percent growth in U.S. dollars, as currency volatility hits U.S.-based vendors, IDC noted.

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Marc Ferranti

IDG News Service
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