Supply Chain for PCs and Smart Phones Hampered by Coronavirus

PCs and other edge devices are beginning to become more difficult to source, given the impacts of the Coronavirus on China and other production centers.

According to the “Financial Times,” several electronics retailers have been told that it is taking up to three times as long for PCs and parts to be delivered. The publication reports that major vendors with substantial resources who are able to pay up front, such as Apple and Samsung, are best positioned to secure the necessary production capacity, while other brands are likely to endure shortages. Related delays can take up to 14 weeks, according to the report, which also said that production at contract manufacturers was running at 20 to 40 percent of anticipated output.

Meanwhile, IDC expects Covid-19 to have significant effects on the semiconductor market, and, by extension, the server and storage market. IDC reports that there is nearly an 80% chance for significant contraction in worldwide semiconductor revenues in 2020, instead of a previously expected minor overall growth of 2%, though the company also states that, with the crisis still unfolding, the actual impacts are difficult to predict.

“The emergence of COVID-19 has brought with it travel bans and quarantines; massive slowing of the supply chain; uncertainty in the stock market; falling business confidence, and growing panic among the population,” said Mario Morales, program vice president, Semiconductors and Enabling Technologies at IDC. “Despite the growing uncertainty and panic, technology suppliers must continue to focus on their long-term investments, maintain engagement with partners and prospects, and look to specific markets for stability. Emerging technologies like 5G, the Internet of Things, high-performance computing, and intelligent edge will be fundamental to an overall recovery by the technology sector.”

At this time, IDC believes the most likely outcome for this event will be a year-over-year revenue growth rate of -6% for the worldwide semiconductor market in 2020. End user spending on IT infrastructure (server and enterprise storage systems) is also expected to decline, according to the Framingham, Massachusetts-based market researcher.  Under the current probable scenario server market revenues are expected to decline 3.4% year over year to $88.6 billion and external enterprise storage systems (ESS) revenues will decline 5.5% to $28.7 billion in 2020. The server market is expected to decline 11.0% in Q1 and 8.9% in Q2 and then return to growth in the second half of the year.

“The impact of COVID-19 will certainly dampen overall spending on IT infrastructure as companies temporarily shut down and employees are laid off or furloughed,” said Kuba Stolarski, research director, IT Infrastructure at IDC. “While IDC believes that the short-term impact will be significant, unless the crisis spirals further out of control, it is likely that this will not impact the markets past 2021, at which point we will see a robust recovery with cloud platforms very much leading the way.”

Channel Impact^®
With technology procurement hampered by supply chain effects, channel partners will need to execute careful planning of resources.