IT Supply – effect of coronavirus: notebook sector suffers, global chip supply outlook worrying

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

The biggest news for buyers this month, as for the rest of the economy, was of course the ongoing spread of the coronavirus, with at least one major investor suggesting that it could spark a 20% pullback in the technology markets overall. The virus is beginning to show up in supplier revenue forecasts with Apple issuing a profit warning as a direct result of the outbreak's effect on Chinese production capacity, causing stocks to slide and equity to rise.

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

Economic turbulence gave the euro a bumpy ride during February. News emerged mid-month that Germany, widely regarded as the engine of the EU economy, was flatlining as a slowdown in spending and exports wiped out growth. This accompanied news that Eurozone growth had hit a seven-year low at just 0.1%.

In February, the euro began on a high against the USD at 1.109, but then began a long downward trend that saw it bottom out at 1.0796 on February 20th. It ended with a rally that began gently at first, reaching 1.0877 on February 26th, before rising sharply over the final two days to end the month at 1.1004.

Things were more volatile against the GBP. The euro began the month at 0.8400 and rose quickly to 0.8491 on the 4th. Then it ranged between 0.8465 and 0.8486 through February 9th before diving to 0.8301 on February 15th. A rise to 0.8375 on the 20th preceded a flat period through to February 25th, before spiking to a high of 0.8564 at the month's end.

Traditional PCs

The coronavirus outbreak caused significant problems for the notebook sector. TrendForce revised its February notebook shipment forecast from 10.8m units down to 5.7m, representing a 47.6% YoY decrease. DigiTimes expected a dismal Q1 as PC vendors slow down orders for ICs and related components. IDC confirmed that the virus would have an effect on personal computing devices overall with traditional PCs expected to drop 7.1% this year compared to 2019, it predicted.

The EMEA PC market is expected to see a less troubling 1% decline to 72.2m in 2020, said IDC, with the strongest revenues early in the year. The market will grow 1.6% in 1H 2020, while performance will be flat in 2H. Both Intel CPU shortages and the virus will impact the Western European market in 1H 2020, analysts added.

The commercial sector will be buoyed by the remaining Windows 10 transitions and by stronger-than-expected demand for small-format commercial desktops. A lot of that growth comes from a handful of large deals in the public sector. The consumer market will stagnate, though, and shouldn't expect growth until Q4 2020.

Memory

Concerns are growing about the global supply of memory chips this year as the coronavirus spreads rapidly in Korea. DigiTimes added that Korean manufacturers Samsung Electronics and SK Hynix account for 73% of the global output for these devices.

DRAM revenues held steady in Q4 2019 as shipment growth offset price declines, according to TrendForce. It saw buyers increasing their procurement volumes ahead of time, leading to a modest 1.5% revenue QoQ decrease during that period. Q1 contract prices rallied as cloud service providers continued building inventory, although the analyst still expects all three dominant DRAM suppliers to post QoQ revenue drops.

Monthly statistics

The number of new products that came onto the market was low in February, with a high of 323 new products (ten times its starting figure) on February 3rd.

Price increases hit four noticeable highs in February - 33,386 on February 5th, 35,662 on February 10th, 41,161 on February 21st and 39,684 on February 24th, occurring across a variety of product categories. Meanwhile, price decreases hit a high of 45,469 on February 25th.

You can read more updates on IT supply shortages here 

And Spend Matters is running a series on technology providers covering five specialty areas where you can go for risk management help during these challenging times.

Also - Through March 2020, a special Spend Matters PRO Expert Survival Pack is available to procurement practitioners  at up to 50% off – Learn more

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