Coronavirus: Supply issues hit PC market

Despite strong demand, the pandemic caused problems in sourcing kit and forced the PC market to reverse three quarters of growth

Coronavirus has had an impact on PC supply chains despite the hard work of the industry to counter the negative impacts.

Figures from major analysts have started to emerge giving a picture of what happened in the first quarter and how much of an impact Covid-19 has had on the industry.

Demand surged thanks to the shift towards home working, but a PC industry still recovering from Intel chip supply issues found that life became even more difficult once the Chinese factories closed in February and remained shuttered for weeks.

Canalys

The channel analyst found that the PC market declined by 8% in the first quarter, with coronavirus to blame.

The first three months saw 53.7 million units, including desktops, laptops and workstations, shipped with the established vendor line-up of Lenovo, HP and Dell remaining in place. Apple was the hardest hit, with declines of 20% in Q1.

“The PC industry has been boosted by the global Covid-19 lockdown, with products flying off the shelves throughout Q1,” said Rushabh Doshi, research director at Canalys. “But PC makers started 2020 with a constrained supply of Intel processors, caused by a botched transition to 10nm nodes. This was exacerbated when factories in China were unable to reopen after the Lunar New Year holidays.

“The slowdown in supply met with accelerated demand, as businesses were suddenly forced to equip a newly remote workforce, placing urgent orders for tens of thousands of PCs.”

Doshi pointed out that it was not just office workers who needed technology and the widespread closure of schools had also affected demand.

“Children, too, needed their own PCs as schools closed and lessons went online,” he said. “The urgency of demand from both the consumer and commercial sectors, combined with the shortage of supply, meant device cost was no longer the key consideration. Instead, speed of supply was the most important factor.”

Canalys expects the major vendors to report strong results for Q1 thanks to the surge in demand from users, but has warned that the current situation is unlikely to last and the prospects for the rest of the year are less certain.

Ishan Dutt, analyst at Canalys, said: “As we move into Q2, the production constraints in China have eased. But the spike in PC demand seen in Q1 is not likely to be sustained and the rest of the year looks less positive. Few businesses will be spending on technology for their offices, while many homes will have been freshly equipped.

“Many parts of the tech industry have benefited from the early part of this extraordinary lockdown period, but we expect to see a significant downturn in demand in Q2 2020. With factories now reopened and virtually up to full speed in China, PC vendors will face a challenge to manage supply chain and production correctly over the next three to six months.”

IDC

The vendor saw things slightly differently, with the global PC market declining by 9.8% in the first quarter.

“Though supply of new PCs was somewhat limited during the quarter, a few vendors and retailers were able to keep up with the additional demand as the threat of increased tariffs last year led to some inventory stockpiling at the end of 2019,” said Jitesh Ubrani research manager for IDC’s Mobile Device Trackers.

“However, this bump in demand may be short-lived as many fear the worst is yet to come and this could lead to both consumers and businesses tightening spending in the coming months.”

Europe, the Middle East and Africa (EMEA) saw a single-digit decline compared to last year, ending three quarters of growth. IDC pointed the finger of blame squarely at coronavirus, which was enough to counter the strong demand for notebooks and desktops.

But the analyst house added its take on the idea that the shift towards home working will remain a more permanent feature, even after the end of Covid-19.

“IDC believes there will be longstanding positive consequences once the dust settles,” said Linn Huang, research vice-president, devices and displays at IDC. “Businesses that once primarily kept their users on campus will have to invest in remote infrastructure, at the very least, for continuity purposes.

“Consumers stuck at home have had to come to terms with how important it is to keep tech up to date. This should provide a steady, long-range tailwind for PC and monitor markets, among other categories.”

Gartner

In terms of the decline in shipment numbers in Q1, Gartner reported the bleakest set at 12.3% down. That was the sharpest decrease in the PC market for seven years.

PC shipments in EMEA declined by 7% year on year to 16.8 million units and the analyst house expects that downward trend to continue for the rest of the year.

“The single most significant influencing factor for PC shipment decline was the coronavirus outbreak, which resulted in disruptions to both the supply and demand of PCs,” said Mikako Kitagawa, research director at Gartner. “Following the first lockdown in China in late January, there was lower PC production volume in February that turned into logistics challenges.”

Kitagawa added that anyone who hoped that the PC demand would make the rest of the year a more positive experience could be in for a shock.

“This quarter’s vendor results underscore the growing economic uncertainties that are tightening PC spending, especially among small and mid-size businesses,” she said. “This uncertainty, coupled with the end of the Windows 10 upgrade peak, is causing enterprises to shift their IT budgets away from PCs and toward strategic business continuity planning.

“We will start seeing enterprises and consumers alike extending their PC life cycles on a more permanent basis as they focus on preserving cash.”

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