China has ordered central government agencies and state firms to replace personal computers from foreign companies with domestic alternatives, Bloomberg reported today.

Staffers at organizations to which the order applies were reportedly asked to turn in foreign PCs after a recent weeklong break. The plan is expected to be carried out over the next two years.

More than 50 million PCs could be phased out as part of the initiative, according to Bloomberg. It’s believed that PCs running Windows will in many cases be replaced with computers powered by Linux-based operating systems.

In the future, the initiative to replace PCs from foreign companies could reportedly be extended beyond central government agencies and state firms to include provincial governments as well. Organizations  reportedly can receive an exemption by obtaining a special permit. However, obtaining such a permit is expected to become more difficult over time as the plan to phase out PCs from foreign companies is rolled out.

It’s believed that the move could hurt the market share of HP Inc. and Dell Technologies Inc. in China. The two companies rank as the world’s second- and third-largest PC makers by shipments, respectively. The world’s top PC maker, China’s Lenovo Group Ltd., could potentially help supply some of the domestic PCs that will be used to replace machines from foreign firms. 

According to International Data Corp. research, PC makers shipped 92.7 million desktops, notebooks and workstations during the fourth quarter of 2021, 1% more than a year earlier. Lenovo, HP and Dell accounted for more than half the machines sold. IDC estimates that Lenovo had a 23.5% share of the market as of the fourth quarter, while HP and Dell accounted for 21.2% and 17% of worldwide PC shipments, respectively.

The enterprise-grade PCs commonly used by organizations such as companies and government agencies often ship with more advanced features than consumer machines. For example, many business PCs powered by Intel Corp. processors feature the chipmaker’s vPro software suite. The vPro suite provides cybersecurity features, as well as tools that information technology teams can use to maintain employee computers.

Alongside hardware makers such as Dell and HP, Microsoft Corp. could also be affected by the plan to replace Windows machines at China’s government agencies and state firms. Windows continues to be a major source of revenue for the company. Microsoft’s More Personal Computing division, which includes its operating system business, accounted for $14.5 billion of the $49.4 billion in total revenue the company generated last quarter. 

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