HP, Dell most at risk if China replaces foreign-branded PCs with domestic versions

HP Inc. and Dell Technologies are the companies most at risk if China replaces foreign-branded personal computers with domestic alternatives, according to an assessment of the matter by Citi analyst Jim Suva.

Suva, who has buy ratings on both HP (HPQ) and Dell (DELL), noted that China accounts for roughly 55 million PCs, or 15% of total worldwide PC sales. Both companies have significant chunks of the Chinese PC market, with HP (HPQ) and Dell (DELL) accounting for 10% and 12%, respectively. Conversely, China’s own Lenovo accounts for 40% of the domestic market.

HP (HPQ) shares fell almost 2%, and Dell (DELL) slipped by less than 1% in early trading, Monday.

Suva noted that China accounts for between 8% and 10% share of unit sales for both companies in the country. While it would certainly be a headline risk for HP (HPQ) and Dell (DELL), it’s possible the U.S. could “respond by putting more emphasis on local OEMs, where HP and Dell dominate with Lenovo at 10% share, to offset sales lost in China.”

The analyst also noted that there could be a continued change in the PC supply chain, moving to other regions such as Taiwan, India, Vietnam and Mexico to help “mitigate supply chain concentration risks.” Seeking Alpha