IT Supply Chain: Pandemic continues to impact the technology sector

IT supply chain

Ian Nethercot, MCIPS, Supply Chain Director at Probrand shares his learnings on the latest IT supply chain developments.

The pandemic continued to have an impact on the technology sector in August, with everything from smartphones to servers affected. Smartphone shipments continued to fall, with analysts saying they don't expect a proper recovery to pre-pandemic levels before 2022. There were a few positives though, with sales increases in the notebook and WLAN markets. But these mostly occurred in the consumer space.

To help navigate the ups and downs and maintain a clear view of what represents a fair price, here are some of the latest developments and major movements that are influencing key IT product categories.

Phone and Tablets

Global smartphone shipments saw a 20.4% YoY drop according to analyst house Garnter. Meanwhile, IDC predicted a 9.5% decline in smartphone shipments throughout the year to 1.2bn. It predicted that the market will recover by 2022, driven by 5G phones which will capture 50% of the market globally the following year. It also estimated a YoY growth of 9% next year but that's warped by the grim decline in 2020 sales. 2022 will be the first year of recovery to pre-coronavirus levels.

Traditional PCs

Notebook sales in Western Europe continued to fare well in Q2, according to CONTEXT, with shipments up 55% YoY. Commercial sales fared best, rising 70.4%, with consumer sales still enjoying a respectable 38% rise.

This all happened at the expense of desktops, which fell 27.8% YoY during the quarter. Commercial sales took the brunt (down 31.6%) with consumer products down 17.5%.

The UK saw the most extreme rise in notebook sales, at 103.5%. It also saw a bigger fall in desktop shipments than the Western European average, down 36.3%.

Memory

DRAM revenues grew 15.4% to $17.1bn QoQ during Q2 as prices and shipments rose, according to DRAMeXchange. Expect soft prices in Q3, though, as customers manage high inventory levels. Server vendors will likely feel that glut first and will lead the price drop. That won't be helped by a projected 4.9% QoQ decline in Q3 server shipments, thanks mostly to a rise in cloud migrations. You can blame that on the pandemic, and it's a big issue for server vendors. The original Q3 forecast saw a more digestible 0.8% shipment drop.

IC Insights says that while DRAM may recover slightly in 2020, the three big manufacturers are being cautious and keeping capital investments low. Samsung will trim its DRAM capex investment 21% to $4.9bn, SK Hynix's will drop 38% to $4.0bn, and Micron's will fall 16% to $3.6bn, it said.

Exchange rate

The euro's gain against the dollar in August was tidal, surging forward and back in waves before finishing the month on a high. It began the month at 1.7775, falling slightly to 1.1753 on August 3. From there, it rose to 1.1865 on August 6, before falling to 1.1756 five days later. Another surge saw it hit 1.1914 on August 18 before finishing the month at 1.1923.

Things were different against the pound. The euro began the month at 0.8993, rising to 0.9035 on August 5 before dipping to 0.8986 on August 11. From there, it hit a ten-day high peaking for the month at 0.9053 on August 17 before falling to 0.8984 on August 21. After a half-hearted rally, it lost steam and tanked to 0.8914 on August 29, limping in at 0.8933 on August 31.

The euro's rise against the dollar was remarkable, especially given the dire figures from Eurostat in mid-August, which noted a 12.1% drop in GDP and a 2.8% fall in employment in the Euro area in Q2. This is due, at least in part, to assumptions that Europe's social and economic recovery from the pandemic will beat that of the US.

Monthly statistics

Stock increases experienced a high of 10,615 on August 24. Stock decreases ranged between around 10,000 and 12,000 for the month, with a brief climb to 13,114 on August 17.

Price increases hit a notable high of 52,517 on August 4, across a variety of product categories. Meanwhile, price decreases hit a high of 36,022 on August 28.

 

Disclaimer: The opinions expressed are those of the author and do not necessarily reflect the official position of Spend Matters.

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