2020 was supposed to be a good year for the PC.
With Windows 7 support coming to an end, Microsoft, Intel, and their hardware partners were expecting a lift in PC sales this year. Even a small bump is a big deal. The year also held the potential for something new. A number of exciting developments set for 2020 promised to expand the capabilities of modern PCs, completing the revolution 2-in-1 PCs started (but never finished).
Then the coronavirus happened.
A disruption in the cycle
I spoke to Malini Paul, an IDC Research Manager in Client Computing Devices to find out more about the impact of the coronavirus.
“Our new update to IDC Worldwide Black Books shows that total PC spending will decline by 6%, compared to plus-7% growth in 2019,” she told me, referring to the firm’s updated projections. “Although part of the slowdown will be driven by comparisons to 2019, the majority of this decline has been attributed to coronavirus.”
That 13% difference is a huge disruption for an industry that’s already struggling with growth. Paul was careful to distinguish between PC sales and the ecosystem of services, software, and devices surrounding the PC. There’s plenty of optimism that products like smartphones will continue to enjoy growth in the back half of 2020, especially thanks to 5G.
It’s PC sales, specifically, that’s holding back the industry as a whole.
As of early 2020, Windows 7 is still the second-most popular operating system in the world, trailing only Windows 10. Corporations, businesses, and some consumers have been holding out for an upgrade for as long as possible. Still, Paul said analysts weren’t expecting a dramatic spike in sales coming into 2020. Consumers and large corporations have been replacing their old Windows 7 devices with new Windows 10 machines since 2017.
Growth in the PC market was instead expected to come from small and medium-sized businesses (SMBs), as they’re often the last to upgrade hardware. Now, the coronavirus is standing in the way.
“The decline was soft, and now, the decline is steeper.”
“We were expecting a peak in 2020 from SMBs, but now, with the coronavirus situation and its implications on political and economic sides, we are not expecting that growth,” Paul said. “If the economy is being affected, they are the ones being hit.”
At the beginning of the year, IDC predicted a 4.6% decline in PC shipments in 2020. With the onset of the coronavirus, that’s been adjusted down to 7.1%. As Paul said, “the decline was soft, and now, the decline is steeper.”
That drop might not sound bad on the surface, but we’re only beginning to feel the effects of the pandemic.
How long are we in this for?
Paul pointed to SARS as a historical comparison for coronavirus. That virus caused global concern in 2003 as an outbreak spread across Asia, then began to make its way across the globe. “It was a similar situation,” Paul said, comparing SARS to the coronavirus. “It broke in 26 countries, and 8,100 cases were detected. The estimated impact on the industry was $1 billion dollars just in [the Asia-Pacific region], including Japan.”
Paul points out that SARS didn’t stick around for long. It broke out in the second quarter of 2003. Markets recovered by the end of the year. Even if SARS and coronavirus were equivalent in severity, the impact today would still be more severe. Today’s PC production is even more dependent on exports from China.
Even if the coronavirus was magically cured today, we still wouldn’t recover the losses until early 2021.
“It’s difficult to say how it’s going to pan out for coronavirus because things are still spreading beyond China. If everything gets back to normal, manufacturing goes back to 100% capacity — even in that case, it would take at least two more quarters to recover in order to accommodate all the backlogs. It’s not easy. You need to restart that production.”
IDC predicts that even if the coronavirus was cured today, the PC market wouldn’t recover until 2021. However, coronavirus is already more severe than SARS ever was. The 2003 SARS outbreak included 8,098 known cases and 774 deaths. The coronavirus has caused over 115,000 known cases, and over 4,000 known deaths, so far. The rising number of cases in Europe and the U.S. is causing companies to force employees to work from home.
Production and distribution is the limiting factor. Even products that seemed ready for stores at the beginning of the year are being delayed because of international logistics problems.
“Even basic supplies like packaging boxes are factors that are inhibiting the supply chain,” said Paul. “From the production side, we’re seeing more of an impact toward shipments supposed to happen in the March or April time frame.”
A loss of momentum for the PC
Upgrading systems to Windows 10 was never going to save the PC. It was a temporary reprieve — and no more. However, 2020 also offered hope of new innovations in the PC space. It was set to be the year dual-screen laptops, like the Surface Neo and ThinkPad X1 Fold, arrive. These devices would also debut Windows 10X, the next evolution of Microsoft’s operating system.
This is also the year of Intel’s first discrete graphics cards, adding a third competitor to the graphics card market. AMD, meanwhile, hoped to fight against Intel’s dominance in the laptop market. Its new Ryzen 4000 chips were announced at CES, right before the coronavirus started to take hold of supply chains. We’re still waiting to hear how that launch will be affected.
These developments could breathe new life into PCs. Now, some or all of them could be delayed, losing the momentum they need for a successful launch. Success relies on public perception, so a slow or clumsy launch is all it takes to dampen excitement. In the end, that leaves the entire industry in jeopardy — with no end in sight.
