Coronavirus is expected to send PC sales into a tailspin, reversing the first tentative signs of growth we saw for the industry as a whole in 2019, and cutting sales by as much as 30 percent by the end of the year, according to unnamed “industry sources.” Asus is reportedly expecting a 40 percent drop in Q1 sales. While factories are beginning to come back online in China, Europe, and North American markets are on lockdown.
“With many cities in North America and Europe locked down and the EU closing its external borders, Amazon has also announced that its warehouses in the US and the UK are only storing and shipping daily necessities from now on until April 5, and the move is expected to hinder PC sales during the period,” DigiTimes said. The site also stated: “Asustek has already estimated a 40 percent sequential drop in its first-quarter PC shipments, while most other PC brands are likely to see shipments nosedive.”
It’s clear that these drops are going to ripple through the entire PC industry. A drop-off that large in laptop and desktop shipments will kill sales of the components used to build those systems. We might see some buffering effect, in the end, Q1 data because companies will need to rebuild some inventory after weeks of disrupted shipments. But companies like HP and Dell are going to be limited about inventory build while shipments are expected to be so depressed. We might anticipate a few additional sales to workers who are now at-home or from companies buying equipment to facilitate at-home work, but it’s not going to make up for the overall size of the downturn.
A recession isn’t coming. We’re in one, right now. We’re going to be in it through at least the end of Q2 2020 according to everyone, with some potential recovery in Q3. Companies like Intel have emphasized that are hitting more than 90 percent of their shipment targets, but we don’t know what that means in absolute numbers.
The Coronavirus Economic Outlook
Earlier this week, there were estimates from analyst first that Covid-19 could result in a net loss of one million jobs in the North American job market. Those figures now look downright optimistic. In an updated note today, Goldman Sachs stated it expects 2.25M job losses in the week of March 15 – 21.
Coronavirus presents a unique economic challenge because the requirements of pandemic isolation dampen the normal sources of spending that could be counted on to partially cushion a recession. During a normal economic downturn, businesses tend to be less impacted than consumers and may continue with plans to upgrade off a previous version of Windows or to a new generation of servers — just at a slower pace. But that’s not going to happen in the kind of economic freeze we’re in right now, and the idea that corporations currently struggling to implement work-from-home will also be ponying up a lot of money for hardware upgrades during the fastest economic downturn in history is dubious at best.
I’m pivoting to address the larger economic point more broadly because it’s a point some of you have raised in reader comments. Over the past week, pandemic experts across the planet have emphasized the need for social distancing and to send workers home. I have echoed these statements and added my own voice to them. Some readers have argued against these policies precisely because the economic hit is going to be so large. Some have brought up the fact that the Covid-19 death rate is relatively low, though this point still very much depends on which population demographic you’re examining.
I don’t think it’s unreasonable to ask if we’re really doing the right thing to contain this virus when you’re reading about 30-40 percent shipment declines quarter-over-quarter and 2.25M lost jobs in a week. According to the CDC, WHO, and now, after some significant delay, the White House (for which I am very glad), the severe social distancing tactics are the right thing to do, despite the absolute hammering we’re all going to take. But how can this be so?
In a nutshell: Because the fatality rates that you see reported in the news for various demographics presuppose that new patients who become sick in the future will die at the same rate as patients who were sick in the past. Those rates, in other words, depend on a fully functional medical system. The more stressed the medical system, the less likely we are to hold deaths to the “official” percentages. The more cases that surge into the hospital system at the same time, the less likely it is that any given person will receive the full measure of appropriate care. In short: When and how many people become sick matters, and it matters a lot.
According to a study of severe coronavirus cases conducted in Wuhan, severe coronavirus patients can require ventilator assistance for weeks (the median was seven days, but some were still on invasive ventilation at 28 days). The death rate for critical cases with ventilators was 61.5 percent by the 28-day mark, when ventilators were used. Without them, the death rate of these critical cases would be even higher.
You have heard by now, I’m certain, of the idea of “flattening the curve.” The idea is that by taking radical action to slow the spread of coronavirus now, we can make certain the medical system doesn’t become overloaded. The only way to do that, unfortunately, is by literally blowing every other curve.
The reason everyone is taking these steps is that the fatality rate under these overloaded conditions isn’t going to be 1-2 percent. I won’t pretend to know what it would be — but the CDC’s estimates for how many people coronavirus could kill in a worst-case scenario was 1.7M dead, with infection rates of 160M to 214M over the next 12 months. That doesn’t count the people who would die at increased rates from all other causes, due to nearly 100 percent of medical resources being devoted to coronavirus. The reason our projected outcomes are so different from China is that the United States did not and has not engaged in the kind of ruthless quarantine enforcement China used or the mass testing of individuals they brought to bear. We have engaged in mitigation strategies rather than suppression strategies. I’m not claiming, in any way, that the CDC worst-case scenario is going to happen — but that’s what we are working to avoid.
Many of you have correctly observed that this kind of shutdown is unsustainable in the long term. You are quite correct. The point of scramming the economy as if it was a nuclear reactor is to ensure that we have to deal with this for as short a time as possible. The only way to make that happen is to apply mandatory rules to furlough employees and lock down individual travel.
The reason we’ve been highlighting the handful of companies refusing to obey best medical practices is that the fastest way to bring this problem to a close is by sending people home, isolating ourselves, and closing businesses. Like a lot of you, I’m worried about the recession we’re already in. Medical experts are unilaterally recommending that we take these steps to end coronavirus here and now because the costs of allowing this virus to become an endemic yearly illness are enormous. Coronavirus is not the flu. It has a higher lethality rate, it spreads more easily, and it puts people in the hospital for a longer period of time. An endemic infection of coronavirus worldwide would have a massive impact on long-term human health and lifespan.
As for whether these are the right moves to make? I don’t know. Neither do you. None of us has ever lived through a global pandemic, and even if people who survived the 1918-1919 flu pandemic were still around to tell us about it, they didn’t experience it in a modern globalized economy. But what health experts, the CDC, WHO, and (now, finally) the White House are all recommending is to shelter in place, shut everything down, and brace for impact. Sending GameStop employees to work isn’t going to change what’s coming. Only massive intervention from the federal government to prop up the economy is going to help, and sending people into danger will literally only prolong the length of this disaster.
Finally, as a matter of fact and law, multiple state governments are now ordering all people to stay indoors. Illinois and New York State both issued such orders today. Advocating for companies to send personnel home in all but emergency cases is not a fringe idea. As of Friday, May 20, it’s now the legal status of tens of millions of Americans.
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