Computer vendors expect stagnation in the markets in 2023
Prices of refurbished PCs have fallen in the past year along with continued uncertainty in the economy, but ITAD players said the market appears to have stabilized — for now.
Chris Coe, CEO and co-founder of electronics recycling company ER2, said he’s seen demand for desktop computers drop about 30% in the past year. He added that the demand for laptops has leveled off and stabilized, but prices have fallen by about 40%.
ER2 is headquartered in Mesa, Arizona, and also has facilities in Sacramento, California, Memphis, Tennessee, Nashville, Houston, and Council Bluffs, Iowa.
The company’s sale rate within a 30-day period is about 52%, Ko said, “which means we will sell out all of our products in about a 60-day period.”
He added that ER2 has approximately 15,000 laptops in stock, and going through that amount of product in a couple of months shows the market demand.
“But the prices have gone down,” he said.
Economic factors effect The market for used computers is multifaceted: the impact of inflation on consumer spending, corporate IT shifts associated with remote work and the politics of pandemics in Asia, to name a few.
E-Scrap News recently spoke with a few renovators to understand what they see in the market, as well as how they respond.
After an “extraordinary” period
George Hinkle is the president of ITAD and electronic scrap recycling company Arcoa Group, which is headquartered in Waukegan, Illinois, and has processing locations in that city as well as Akron, Ohio, and Kenosha, Wis.
Used equipment prices began to fall in the spring of 2022, Henkel said, but by December they had started to plateau. He noted that the decline was from Extremely high pricing Right after the pandemic, which led to an increase in the demand for computers needed to work from home.
These excellent prices led to an “exceptional” year for Arcoa in 2021, Hinkel said.
“I fell from something that was very unusual,” he said. He added that Arcoa expected a decline in used equipment prices in 2022, but the decline in mid-2022 was faster than the company expected.
On the West Coast, Digital Green Global ITAD’s Albert Lozano said his company sells used equipment almost exclusively through e-commerce channels, with the vast majority of sales to North American customers.
Overall, he said, the secondary markets “have been stable.”
Digital Green Global has processed more than 1,000 tons of materials in 2022, most of it for recycling. In terms of resale, the company sold more than 25,000 used electronics in 2022, not including shredded components or recycled goods. His firm, which mostly serves large corporate clients, has facilities in Morgan Hill, California, and Dallas, Texas.
Used consumer electronics haven’t moved as quickly lately, Lozano said, and are selling for prices roughly 10% to 15% lower than in pre-pandemic markets. But he added that markets remained healthy for lab equipment and server equipment.
One category that has fallen out is the recovered memory that was sold and shipped to Asia. He said that this part of Digital Green Global’s business was once a great source of profits but has come to a near complete halt after China’s campaigns against the coronavirus.
Effects on customer revenue share
For ER2, market changes mean customers are making less money on each item.
“Our customers themselves, from a revenue sharing perspective, are getting less because we don’t get as much value, but they understand that,” Kuo said.
The company has also changed its criteria for what’s worth refurbishing, he said, because although older products continue to be sold, lower prices mean they’re often no longer worth the cost.
“Everything that can be reused can no longer be renewed and that’s the problem,” Kuo said, adding that the break-even point for ER2 is about $80. Any device that cannot be sold for more than that is a device that the company loses money on. Right now, that means laptops with a sixth-generation Intel Core processor or older don’t work, he said.
“Our customers themselves, from a revenue sharing perspective, are getting less because we’re not getting as much value back, but they understand that.”
– Chris Kuo, CEO and co-founder of electronics recycling company ER2.
Arcoa has its roots in reselling desktop copiers/printers, and Hinkle said the dynamics have varied for different types of devices. For printers and networking equipment, he said, the market remained strong, with the sharpest pick between laptops and desktops.
Some components have undergone significant changes in the market. He said RAM and processor values, which are closely tied to Asian markets, have fallen significantly.
Hinkle noted that since the late spring/early summer time frame, when there was a lot of price volatility, the market has calmed down.
“From what I can tell, I think the markets have stabilized for us,” he said.
A changing industry
ER2’s Ko predicted that the declining demand for desktop computers will continue due to the rise of remote work.
Companies don’t bring as many employees into the office now, he said, “and if they did it wouldn’t be across the desktop.”
“There will be fewer and fewer of those in the workplace, but I think there is interest from schools and global markets,” Coe said. “In Dubai, India, and the rest of the world where they don’t care about commuting because a lot of people don’t necessarily have internet at home, so they’ll be able to stay there.”
Although educational institutions are still looking for desktop computers for computer labs and international markets, prices and demand have also fallen in those markets as well.
In June, distributors too pointed out Decreased demand in international markets due to the high costs of shipping materials.
“From what I can tell, I think the markets have leveled off for us.”
– Georg Henkel, President, Arcoa Group.
Robin Ingenthron, founder and CEO of Vermont-based Good Point Recycling, said outside buyers of used equipment are hurting right now. Two of them are not placing orders for computers at any price, and some have placed orders but Ingenthron isn’t keen on shipping the equipment to them because they still owe Good Point Recycling money for previous orders.
He noted that stimulus money during the pandemic may have shipped the market earlier, contributing to lower demand now.
He said, “People probably bought two years worth of new equipment in one year, which is part of what they blamed on inflation — overheating the economy. All that stimulus money.”
Still, it gets a lot of calls for its used desktop monitors, even though the price offered is fairly flat. He said he believes the desktop monitor market is declining, so the recent increase has baffled him.
Withstand the coming storm
As economists continue to sound alarm bells, businesses are bracing for a deeper recession as inflation remains high and consumers worry about making ends meet.
HP recently announced that it plans to cut its workforce by 10%, with HP CEO Enrique Lores Says “We think that at this point it is wise not to assume that the market will turn around during 2023,” the Wall Street Journal said.
How can ITAD companies withstand market changes?
Kuo said he’d like to see the ability for certified refurbishing to sell partially repaired items to people interested in making their own modifications, but that’s not currently an option under most certification requirements. He said it could help keep older models that wouldn’t otherwise drive down prices into circulation.
“The ability to say, ‘Hey, this has been fully tested, the components work, it just needs a battery,’ and then somebody might actually be willing to buy it and they’ll put their battery in and do whatever they want,” he said.
Kuo said he believes laptop prices will remain stable at their current level for some time. “I don’t expect roar to come back at all,” due to some remaining issues in the supply chain. He has noticed companies holding back on spending due to recession fears.
“A lot of our clients are Fortune 100 and they’ve really decided to be more conservative with their hiring, and the same with their business in general,” he said.
“All recessions, starting with the 2008 financial crisis, have shown that ITAD companies also struggled to maintain their business and suffered.”
– David Daoud of Standards of Commitment.
David Dawood of Compliance Standards, an industry research firm ITAD, said recently Podcast That the demand for PCs has taken some hard hits, coupled with inflation and rising labor costs, will certainly affect the ITAD sector.
“The number of PCs shipped in the third quarter was lower this year than last year, which confirms that overall demand is contracting,” he said, calling that “perhaps the most troubling piece of information because the seasonal back-to-school trend has been broken.” ”
Although many people claim that when economic growth slows, demand for used equipment rises, Daoud said there is no empirical evidence to support this.
“All recessions, starting with the 2008 financial crisis, showed that ITAD companies also struggled to maintain business and suffered downturns, which led to the subsequent consolidation of the sector,” he said. “There’s also the fact that the price difference between a refurbished device and a new system is shrinking and not very large, which makes convincing buyers to endorse used equipment more difficult.”
Lozano said he believes a broader recession is coming, but is confident Digital Green Global can weather it. He said he has been in business for more than three decades and has seen several market downturns in the past.
“You just have to be safe, play smart and lead the markets,” he said. “be realistic.”