Analyst firm Canalys gives what it says is its "best case scenario", predicting the three percent-plus fall in PC shipments - as opposed to its previous forecast of an increase of 0.3% - as the coronavirus (COVID-19) affects the channel and the supply chain, both directly and indirectly affecting “sell-in and sell-out”.
And shipments to China are expected to fall by more than 20% sequentially in Q1 2020 to 14.3 million units, due to a direct impact on retail purchases.
The Canalys report also says that high-growth markets, such as the US and Japan, are expected to decline in 2020, as inventory stockpiling in anticipation of increases in tariffs and IT spending for the Olympics comes to an end.
“Supply chain shortages, primarily in PCBs and memory, are expected to affect shipments of certain product lines, with ODMs and component manufacturers prioritizing high-value segments when resuming full operation,” Canalys notes.
Specifically, in its February 2020 update forecast, Canalys says it presents two scenarios, for the best and worst cases, representing the minimum and maximum level of impact of the COVID-19 outbreak.
“The major difference between the two scenarios is in considering the length of time that it would take for normal operations to resume in China and the rest of the world with successful containment and control of the current COVID-19 outbreak,” says Canalys.
“Particular emphasis has been given to production and manufacturing, with the assumption that channel health and consumer demand will respond quickly to adequate supply in the market. Published forecast estimates to our clients represent only the bestcase scenario - Canalys expects, with 80% certainty, that the best-case scenario will prevail”.
“In the best-case scenario, production levels are expected to revert to full capacity by April 2020, hence the biggest hit will be to sell-in shipments in the first two quarters, with the market recovering in Q3 and Q4,” Canalys reports.
“Thus, worldwide PC market shipments are expected to decline 3.4% year on year in 2020, with Q1 2020 down by 10% and Q2 2020 by 9%. PC market supply will normalise by Q3 2020.
“On a yearly basis, Canalys expects the worldwide PC market will slowly begin its recovery starting in 2021. Driven by production levels returning to normal and pent-up demand, we expect small year-on-year growth in 2021, followed by a CAGR of 0.6% between 2021 and 2024.”
According to Canalys, China will be worse affected than the rest of the world, “as the COVID-19 outbreak is not just a supply-side shock to production, logistics, shipping, etc, but also a demand-side shock”.
“In particular, PC consumer segment demand will be markedly more affected than demand in the commercial segment. Hence the Chinese market is expected to recover slower than the worldwide market.”
But despite the pressure on Q1 sales, Canalys says customer adoption of cloud-based services will increase as more people use videoconferencing and collaborative and online tools to execute business continuity plans and reduce travel - with vendors focusing on partner training and maintaining close communication with customers and partners.