PC Guide sent Mike Tomlinson to find out how the current health crisis will affect aspects of the technology industry and stop you getting the components you need this year.
Right now the world is in an unprecedented state. Between the international lockdowns and general states of emergency, lots of people are spending much more time at home – and that means they are turning to all different forms of traditional at-home entertainment to keep themselves busy – and that includes computers, for both gaming and media.
In a nutshell, this means that a lot of people around the world all became interested in the very same thing at once, at a time when supply chains are struggling due to the impact of Coronavirus. In short: there might not be enough to go around.
A lot of the most industrious, consumer favourite and reliable brands in the PC world operate supply chains that can span continents, with a lot of products being manufactured in Asian countries – specifically China and Taiwan.
In fact, the dip in production within Chinese factories has a lot to do with the current shortage in different PC parts and PCs as a whole. China has been shutting down and restricting factory usage since the beginning of early January, and as a result, companies have not been able to ship stock as expected.
It’s not just shipping effected either. Overall profit margins and revenue forecasts are being thrown out by manufacturers at the moment as the unprecedented and unpredicted coronavirus wreaks havoc within production lines, workers, shipping and all other facets of the traditional supply chain.
Take Foxconn for example. Foxconn is the worlds biggest electronics manufacturer, and are relied upon by some big names within PC production – Acer, Nintendo, Microsoft, Sony, Dell, Hewlett Packard and Apple all use Foxconn as one link within their supply chain. They are just one of the companies affected heavily by the coronavirus and have warned that their production process won’t be scaled back up to a normal level until at least the end of March, and that they have no idea how the virus is going to affect the yearly revenues of not only themselves but of the companies that they work with.
This is just one manufacturer though, but one who plays a vital part in the distribution network for a number of major players within the computing industry. At best estimation, it has been reported that 95% of all fortune 1000 companies buy components from China, so it going to be a revelation to see how this virus has impacted worldwide revenue.
Obviously, disruption within manufacturing plants and factories means that the finalized product is going to take longer to reach the end-user.
Take Dell for example. In order for its stock to hit shelves in Australia, their lead times have had to be extended from their regular three to five weeks to double that, with products now taking up to ten weeks to reach shelves.
This is just one of the major players within the technology market though, so we may be better served by looking at a real-world example of an in-demand product that has suffered from manufacturing issues.
The Nintendo Switch is one of the worlds most popular gaming consoles and has been in demand since it was first released. As mentioned before, Nintendo is one of the many companies who outsource their production to Foxconn, and as such have been hit by the production issues already discussed – Nintendo have actually been very open about this.
Regardless, the classic Nintendo Switch console has been a victim of the manufacturing slowdown – and as a result, is becoming sold out across the board. In more popular seller marketplaces like Amazon private sellers have been able to mark the price of the console up to 40% higher than its RRP thanks to its popularity and lack of stock.
This isn’t just the case in the USA either, in Europe, the UK and across the world, the Nintendo Switch has been the victim of an inflated price thanks to opportunistic third-party sellers.
It’s safe to say that the Nintendo Switch could be a litmus test as to how the rest of the market will be treating commodities such as graphics cards, motherboards, and other PC parts, as they remain highly in demand, bolstered by a potential customer base with a vested interested in indoor hobbies.
Looking at some other statistics as examples, Digitimes recently reported that Mobo and graphics cars shipments in China could hit a record low; solidifying the concerns raised earlier in this article about the production process and overall supply chain being effected by the coronavirus.
Overall, the worldwide PC marketplace is set to be drastically changed from previous years in terms of overall sales and progression. In fact, Canalys has predicted that this year global PC shipments could drop from anywhere between a best case 3.4%, and a worst-case 8.5%
One area of the technology industry that is sure to be hit hard by the worldwide slowdown in PC part production is the vast number of diverse, individually owned PC stores that also offer prebuilt PC production as not only a service but as a straight-up product.
Obviously, these stores and well-known brands alike are going to be just as affected by the lack of PC parts and availability as the rest of the world, and perhaps to a larger extent than individual builders as it forms many stores the main source of income; but one aspect of the prebuilt PC market that could take a little longer to recover is the prebuilt PC service.
If for example a shop were to offer a custom-built PC, made to a customers order then the chances are that there are going to be staff members working together to build the PC in question. Right now, this is impossible due to the many different authoritative health services around the world steadfastly agreeing and enforcing a lockdown, or in the least self-isolation.
Whilst many PC shops will be able to operate online to a degree, this prebuilt manufacturing process may be one that takes a lot longer to recover and return to the level of availability that was around before the virus had taken its full effect (which could still be yet to come).
Already we can see the number of prebuilt PC options from well-known brands dropping low in stock on Amazon.com, and that trend is sure to continue as we continue into the uncharted waters that this virus has brought about.
Basically, with social distancing and working from home encouraged, it could be a long time before a totally custom-built PC is a feasible (or affordable) option again, and we expect individual components to be on sale a lot sooner than a full PC to be – perhaps at an inflated price.
One aspect of the Coronavirus’ effect which is yet to be fully revealed is its impact on the progression of technology.
As the distancing and quarantine measures are in place and companies freeze their activities to deal with the economic impacts of the virus, there may well be a gap in the timeline of technological progression regarding PCs, gaming hardware and software and computing in general.
Obviously, the entire tech sector isn’t going to shut down entirely, but there will be a definite slowdown when it comes to product and technological innovation to some degree -though not all see it that way.
Simon Platt, development head of Kwalee recently spoke to information-age.com, and suggested that the virus might not have an entirely negative effect on the progression of development. He said ‘people will still be generating ideas and creating at home, but now have the time to play around with bringing it to light.’ He also suggested that modern conventions such as video conferencing and screen sharing could be vital in keeping the developmental process alive – though it may take longer for the final products to hit consumer shelves.
If this is truly the case, then we might not need to fear a sluggish period in the advancement of tech, but rather suffer longer release windows that reflect on a higher polish on the products that are finally released.
When it comes to the release of products, we are also in the grips of a global pushback. Looking at some of the biggest events in the tech world, we can see that E3 is cancelled, Computex has been pushed to September, etc etc – but these are the events that traditionally a lot of different hardware and innovations were showcased to the public, revealing them to the mass market.
What could this mean for the tech sector as a whole? It could mean that the actual announcements from companies shift to an online presentation format, which might have negative long term impacts on these conferences as a whole.
Let’s say for example that AMD had something new to reveal at Computex, that they wanted to be releasing in Q4 of the year. Now that Computex has been pushed back, AMD might find it more prudent to announce their release via an online briefing in order to mee their release window.
In that scenario, AMD might find it more financially viable to only host their product in an online space, as it means that they don’t have to pay fees and work towards the Computex timeline. Having products ready for a set showcase not defined by AMD themselves might impose restrictions on the AMD development process, and this year’s cancellations could be a test for them to see how an AMD led online launch might fare in the future.
This is just a hypothetical, but we are already seeing companies like Sony, Nintendo and others pulling out of E3 to work on their own schedules, leaving the future of E3 as the defining gaming event of the year in doubt for many. What will happen as a whole to the conference market is unclear, but right now the uncertainty may present an opportunity to some larger companies that can command their own following.
Really though, its too early in the timeline of the virus to predict or understand just how the tech sector will be affected. In a few months we may have a better picture of what’s happening, how it happened and what the eventual impact will be to consumers and businesses alike.
Make sure to check in with PC Guide regularly over the coming months to learn more about the changing state of supply levels, production problems and major delays.