Mobile PC shipments plunged by 13.4 percent in the first quarter compared to the fourth quarter of 2012. While sales typically decline in the first quarter following the peak season in the fourth quarter, the drop this year appears to be abnormally sharp, even exceeding the 10.3 percent plunge during first quarter of 2009, when the financial and economic crises were at their peak.

The previous IHS forecast predicted global PC shipments would rise by 3.4 percent in 2013. However, given the dismal results in the first quarter, it appears that shipments are unlikely to achieve growth for the year. IHS is downgrading its forecast for worldwide PC shipments to be flat at best, but the market is more likely to suffer a 1 percent to 2 percent decline. This follows a dismal 2012, when global PC shipments decreased by 3.3 percent, the first decline in 12 years.

“The PC Industry is facing major challenges as it struggles to find a place in the consumer’s budget amid the rising popularity of the lower-priced media tablet,” said Craig Stice, senior principal analyst for compute platforms at IHS. “Windows 8 has yet to trigger a new PC replacement cycle. While there have been many new product introductions intended to revitalize the market, like the ultrathin mobile PCs and convertibles with touch screens, it seems consumers have yet to discover the return on investment for these higher-priced systems.”

Sales of netbooks, a product Intel dominated with its Atom family of low-end processors, have been badly impacted by the downturn in the PC market as well as the growth in the media tablet. Netbook shipments this year are forecast to amount to just 3.97 million units, down a gut-wrenching 72 percent from 14.1 million units in 2012.

Intel in the fourth quarter of 2012 retained its dominant position at the top of the global semiconductor industry with $11.98 billion in revenue, representing 15.4 percent of global chip market takings. This was more than 4 percentage points ahead of Intel’s nearest competitor, Samsung, which held an 11.1 percent share. However, Intel’s revenue declined by 3.4 percent from $12.4 billion one year earlier in the fourth quarter of 2012.

Despite Intel’s travails, the company is expected to continue to maintain its leadership in the global semiconductor market at least through 2013.

IHS predicts PC market conditions will improve in the second half of the year, as new mobile products—i.e., ultrathins and Ultrabooks—drive market growth. Global shipments of ultrathin and Ultrabook PCs will nearly triple in 2013, mostly driven by increased sales in the second half of the year.

Intel is expected to see improved sales as it rolls out new microprocessors targeting these markets.

Intel appeared to react with great agility to weakening demand for its products, cutting down its inventories very rapidly in the fourth quarter of 2012 to avoid being stuck with excess stockpiles. The company in the fourth quarter was the most aggressive of all semiconductor suppliers in reducing its inventories, cutting them by 11 percent, or $585 million, compared to the third quarter of 2012—the largest decrease on a dollar basis of any chipmaker during the quarter, according to an IHS iSuppli estimate.

“Intel was one of many major semiconductor suppliers that indicated in their fourth-quarter financial calls that inventories would be down or flat in the first quarter,” said Sharon Stiefel, analyst for semiconductor market intelligence at IHS.

“These semiconductor suppliers kept their manufacturing capacity utilization rates relatively low to meet the projected overall reduction in demand in the first quarter. With orders for most semiconductor companies expected to pick up after the first quarter, a flexible, strategic approach to factory utilization and inventory reduction has been a key factor in maintaining profitability for most suppliers.

Intel’s inventory liquidation partly was due to a reduction in production as the company migrated to a new process technology for manufacturing its chips: 14-nanometer lithography, Stiefel said.

Intel in 2012 held a 5 percent share of the market for digital baseband and applications processors used in mobile phones and other mobile devices. Aside from its legacy Infineon business, Intel had seen some design win activity from its Atom product line in smartphones from Lenovo, Motorola and various Chinese brand OEMs. Furthermore, Intel has introduced its LTE platform.

“IHS expects Intel to continue to attempt to build off these early wins and ramp penetration in the mobile platform market—specifically in smartphones,” said Francis Sideco, senior director for consumer electronics and communications technologies at IHS.

“However, even if Intel is successful in this area in 2013, it won’t enjoy rapid growth, but rather slow and steady progress. The company faces significant challenges because of the momentum and positioning of strong incumbents such as Qualcomm, which holds a market share in the mobile-phone semiconductor business that is currently seven times larger than Intel’s.”