IT Supply – effect of coronavirus: another bad month

Ian Nethercot, MCIPS, Supply Chain Director at IT services and marketplace Probrand, updates us on IT supply chain developments.

The coronavirus pandemic continued to impact the IT supply chain and May was another bad month. Smartphone and tablet shipments were down with printer sales also on the ropes. Similarly, the continuing lockdown measures – and subsequent demand for home working products – meant that laptops, headsets and webcams are still very much in constraint.

The good news is that we are starting to see signs of recovery in June as certain technology categories regain stock. As stock starts to reappear and back orders are fulfilled, buyers should sign on to waiting lists and get ahead of the rush. Suppliers will be operating on a first come, first served basis, meaning now is the time to plan purchases.

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.

Exchange rate

The euro began the month at 1,0969 against the US dollar but dipped quickly to hit 1.084 on May 7. It stayed there until May 17, rising to 1.0963 by May 21 before dipping slightly and rallying to a monthly high of 1.104 on May 29.

Things looked much the same for the euro against the pound. It began the month on a Friday at 0.8752, before rallying to 0.8781 on the Monday and then dipping to 0.8726 on the following day, May 5. It began an extended rally on May 11, plateauing at 0.8933 on May 16. It stayed there for another week, dipping slightly to 0.8910 on May 26 and then spiking to a high at 0.9003 on May 29.

GDP was down 3.8% in the euro zone and 3.3% in the EU quarter-on-quarter during Q1, with employment down 0.2% in both regions, according to Eurostat. These were the sharpest declines since the time series began in 1995, it said. The volume of retail trade also dropped 11.2% in the euro area (10.4% in the EU) between March and February, caused by the COVID-19 containment measures.

Phones and Tablets

It was bad news for the smartphone market, which is still reeling from the pandemic. According to TrendForce, yearly production will drop 1.24bn units, representing an 11.3% decrease. Q2 saw a 16.5% production drop, making it the worst quarter on record.

That's just production. Downstream, things looked worse, with Q1 shipments plummeting 16.8% to 274.4m units from 329.9m the year prior, according to IHS.

IDC noted an 18.8% YoY drop in Q1 smartphone shipments in Western Europe, calling this quarter "the calm before the storm."

Multiple sources reported that Apple might be launching its next iPhones in October rather than the normal September date, but production is likely to kick off in Q3.

EMEA tablet sales dropped 9.6% YoY to 8.8m in Q1, said IDC, although things were a little brighter in Western Europe, dipping just 5.7% YoY. Samsung led the EMEA market, with market share up to 24.5% in Q1 2020, on sales down 2.3%. Apple (23.8% share on sales down 9.3%) and Huawei (12.3% share on sales down 4.8%) followed up in second and third place. Lenovo and Microsoft bucked the sales trend, growing their tablet revenues 4.2% and a whopping 19.6% respectively.

Traditional PCs

HP revealed its Q3 results, with notebook sales spiking 5% - however, it also experienced a 23% fall in desktop sales. Lenovo saw an overall drop in company-wide profits during its fourth quarter (January to March), but this was still less than expected. It expects YoY revenue growth for PCs and smart devices, driven by the expansion in home working as a result of covid-19.

Analysts seemed unsure about whether this growth in PC sales will be sustainable for this calendar year. Calendar Q2 demand for PCs driven by the pandemic may have driven short-term sales in the EMEA region but IDC warned that it won't last. It expected sales of traditional PCs there to reach 68.3m in 2020, declining 6.3%. Gartner anticipated a 10% decline in global PC shipments.

Meanwhile, Chromebooks are enjoying the rise in emergency work-from-home purchases. Shipments will reach a record 11.6m units in Q2, according to TrendForce, accounting for an astonishing 25% of quarterly sales.

Displays

Sales of monitors through distributors in Western Europe grew by 35% YoY in March, according to CONTEXT. That's a record. It contributed to an 18% increase for Q1 with the surge driven by business customers stocking up in anticipation of a pandemic-driven supply crunch, compounded by the push to work from home.

According to Omdia, large-format flat panel displays availability will tighten significantly in 2021 after capacity grew almost 50% from 225m square meters per year in 2013 to 335m in 2020. Covid-19 is impacting demand and creating business uncertainty, prompting South Korean suppliers to accelerate plants to exit the market. That will wipe out 57m square meters of capacity between 2019 and 2021, putting the squeeze on supplies.

Monthly statistics

The number of new products that came onto the market was low in May, with a high of 201 new products on May 21.

Price increases hit a high of 40,196 on May 19, across a variety of product categories. Meanwhile, price decreases hit a high of 32,017 on May 25. HP increased and decreased prices the most during the month.

 

 

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