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COVID-19 drives PC market supply down, demand up
The COVID-19 pandemic pushed PC market shipments down, despite higher demand for remote work devices. A looming recession, though, could dampen sales.
The PC market experienced disruption due to the coronavirus outbreak in the first quarter of 2020, with shipments down despite the demand from the jump in remote work.
Both Gartner and the International Data Corporation (IDC) reported a steep decline in worldwide first-quarter PC shipments; Gartner said shipments were down 12.3% year over year, while IDC reported the reduction at 9.8%. The decrease was attributed to supply chain and manufacturing disruptions caused by the COVID-19 pandemic, which shuttered Chinese factories earlier this year.
The reports follow a year in which the global PC market grew for the first time in seven years.
Industry observers noted that the decline in shipments comes amid higher demand for the devices, as quarantines have forced a shift to remote work. Exact figures for the bump in demand are not yet available, but analysts reported seeing an increased need for laptops to enable employees to work from home.
"COVID-19 definitely was the major anchor dragging supply down and boosting interim sales," said Linn Huang, research vice president at IDC.
High demand, but a recession looms
Huang said PC vendors in many regions entered 2020 with "extra winter weight," or higher supply, that has helped them manage the increased demand. U.S. sellers in particular, he said, were preparing for possible tariffs on Chinese-produced PC components.
"The current 'at home' bump has eaten into that winter inventory substantially, to the point where major outlets [have] backordered key monitors, notebooks, headsets and printers everywhere," he said.
Mikako Kitagawa, research director at Gartner, said she expected the "first wave" of demand caused by businesses immediately shifting to remote work to die down.
"The lockdown situation is a wake-up call for many businesses, especially for those [that] have not had a clear business continuity strategy," she said. "Businesses are now realizing that we are heading into a new normal."
As a result, Kitagawa said, some businesses may reevaluate their contingency plans, and purchase laptops to accommodate new continuity strategies.
"This will also depend on the economic condition," she said. "In the recession scenario, businesses would tighten their spending, so the idea [of implementing a new business continuity plan] would be in the low end of priorities."
Joe Cicman, senior analyst at Forrester Research, questioned whether high PC sales would continue. "I'm hearing stories from clients that unplanned purchases of replacement devices increased a bit during the transition to work from home," he said. "But that's not a sustainable pattern."
According to Cicman, the lockdown will likely accelerate a shift from desktops to laptops as working from home becomes the norm. He noted, however, that the shift was already underway, with laptops providing superior mobility for workers.
A supply glut?
Although demand is high and supplies are low at the moment, the situation could reverse itself quickly. The supply chain is recovering, while a possible recession could put a damper on businesses' purchasing enthusiasm.
"We think that, by the time supply fully returns to health sometime in May, [a] global recession will have softened buyer resolve," Huang said.
Kitagawa said PC vendors must not miscalculate need, lest they end up with an oversupply.
Joe CicmanSenior analyst, Forrester Research
"I believe [PC vendors] are cautiously planning right now, despite the sudden increase of demand," Kitagawa said. "I have to say that this is a challenge for all vendors at the moment, because the environment we are now [in] is very unusual and hard to predict."
Cicman said PC manufacturers that have close relationships with their clients will be able to mitigate inventory volatility in the face of changing consumer demand -- the bullwhip effect -- better than those reliant on resellers.
"The lesson from this COVID-19 shock is that companies need a distribution strategy that offers business agility," he said.