By Therese Poletti
The personal-computer industry reversed a yearslong slide in a sudden and explosive way during the first two years of COVID-19, but now growth is slowing just as PC makers are pushing out new machines geared toward the online activities that unexpectedly became everyday tasks
Before the COVID-19 pandemic struck the globe, the personal computer had become a staid, boring product with dwindling sales, as consumers spent their money on new smartphones every couple of years while letting their home laptops and old towers collect dust.
That changed in a dramatic way when people retreated into their homes to avoid the virus and realized they suddenly needed to do everything--work, school, socialize--remotely. The industry was surprised: PC shipments had declined for seven consecutive years from 2012 to 2018, yet they jumped 14% in 2020 and another 14.5% in 2021, a sudden surge unseen since 2007, the year the iPhone was introduced.
"The consumer market had been slowing and slowing and slowing and then, all of a sudden, we hit 2020 and people are at home, and surprisingly, consumers were buying PCs for work, gaming, content consumption, another screen at home," said Ryan Reith, an IDC analyst.
As Zoom (ZM) meetings became ubiquitous for remote work and school, consumers scrambled to equip themselves and their children with computers and suddenly necessary peripherals, such as webcams and headphones -- if they could find and afford them. Component shortages and overwhelming demand left scraps at electronics and office supply stores, even as inflation hit in 2021, pushing prices higher.
For more: The pandemic has brought the personal computer back to life, with help from Zoom
But the renaissance of the PC might have been a relatively short era. On Wall Street there is now little expectation that PCs will continue to be a big source of growth for companies like HP Inc.(HPQ) and Dell Technologies Inc.(DELL), even as Warren Buffett's Berkshire Hathaway Inc.(BRKA)(BRKA)makes a big bet on HP stock IDC now forecasts that global PC industry sales will fall 1.1% in 2022 and 0.1% in 2023, as consumers largely have their new machines and students are back on school campuses.
"It's really a consumer and education slowdown," Reith said. "If you think about all the consumers that purchased in the last two years, whether they were first-time buyers or they had not used a PC in the last whatever number of years, it's going to take another few years before they buy another one."
Yet the activities that became pandemic staples have affected the design of PCs for the better. Remote videoconferencing and streaming are here to stay and many consumers now expect most PCs to handle the most graphically intensive videogames previously played only on consoles.
The Zoom culture became so prevalent that in the first month of the stay at home orders Saturday Night Live did a hilarious skit mimicking a Zoom meeting of a small sales office. Two receptionists were unable to correctly position themselves in front of their laptop cameras, and one even took her laptop into the bathroom with her, while her boss frantically yelled "STOP!"
The latest computers and devices seem to be built to avoid such pitfalls, such as Apple Inc.'s (AAPL)new Studio Display monitor that has studio quality microphones and HP's suite of Presence technologies, including an AI camera and a privacy shutter. These tweaked designs, along with the greater acceptance of remote and hybrid work, are the legacy of the pandemic.
'It's essential! It's officially on the essential list!'
On March 19, 2020, California Gov. Gavin Newsom ordered the state's 40 million residents to stay in their homes due to the new pandemic threat, the nation's first state lockdown order. Days later, Newsom issued a list of essential workers who were exempt from the lockdown, and among them were IT workers.
Newsom declared that IT workers were critical, especially those who played a role in helping people to work from home, citing, "workers who produce or manufacture parts or equipment that supports continued operations for any essential services and increase in remote workforce, including computing and communication devices, semiconductors, and equipment."
Many states issued similar exceptions to their workforces, identifying essential workers who could continue to leave home to go to work, as well as lists of essential items consumers were able to leave their house to buy, like personal computers.
As the stay-at-home lockdown orders piled up, Alex Cho, president of HP Inc.'s personal systems business, was briefed by his team on how many businesses around the world had stalled, but that PCs were an exception. Cho realized at that moment that the personal computer had become a big deal again.
"I was sitting right here thinking, you know what, ... it's essential! It's officially on the essential list!," he said. "That's when for us that phrase really was an inflection point of saying, 'Wow, the world has changed.' The PC is essential, it's so essential for work, and for learning, even telehealth, and suddenly what we saw was this category was no longer this thing on the side."
Across the world, there was a frenzied upgrade of home offices, or at least the ad-hoc offices that appeared on kitchen and dining room tables. Neither families nor retailers were prepared.
About a week into the stay-at-home orders, I went looking for a monitor and keyboard for my laptop to create a better workstation at home, to avoid being slouched over my work-issued laptop. By that time, there were two monitors left in a local Office Depot that was mostly occupied by swaths of empty shelves and office workers frantically searching for a sudden need, including the many techies in the Bay Area trying to find additional equipment. Fortunately my laptop was on the newer side, and it had a decent camera and audio, two key attributes in the Zoom age.
I was not alone, as the same scene played out in communities worldwide. Garrett Gwinnup, a computer technician at Boise Computer Depot in Boise, Idaho, said that business has been so strong during the pandemic that his boss bought the shopping center the store was in, expanded the store and is now the landlord for the other retail spaces.
"Previously desktops weren't something you used a lot, but it has gone up tremendously since the beginning of COVID," Gwinnup said. "He went from a very small store to a very large store in one year and a half."
The PC -- often the least used and oldest electronic gadget in the home, relegated to a corner -- suddenly became the most important device in the house. In addition to the huge numbers working from home, children of all ages, including college students, added another element to the picture, creating nightmarish scenarios for parents working from home, with their offspring also stuck with them while their schools figured out how to conduct remote learning. Jerry Paradise, vice president, global commercial portfolio and product management at Lenovo Group Inc. HK:992 said in an email interview that more than 1.5 billion students were forced to stay at home at some point during the pandemic.
For more: The pandemic PC boom gave personal computers their biggest year in nearly a decade
"All of a sudden, your three kids needed to be online and on Zoom everyday," said Maribel Lopez, principal analyst with Lopez Research. "You might have only had one machine at home, but you had five people who needed to use it."
If a parent had a laptop from work, they were the lucky ones with a relatively newer machine. As the Zoom phenomenon began to take off as a way for companies to hold team meetings, and schools began to experiment with remote classes, it became clear the old PC was not up to the task.
Unfortunately, neither was the PC supply chain.
Booming sales and chip shortages
Memory chip maker Micron Technology Inc. MU reported earnings in late March 2020, just after the initial stay-at-home orders were issued. CEO Sanjay Mehrotra described for analysts on the company's earnings conference call how Micron was sanitizing its manufacturing facilities and that its workers were social distancing on the line. The company, Mehrotra said, was dealing with border closures and a temporary shut down of its NAND assembly and test site in Malaysia, and a couple of sick workers.
Read also:Micron CEO optimistic even amid unprecedented times
It was merely the tip of the iceberg. As the pandemic wore on, supply chain disruptions and then semiconductor shortages became the biggest concerns among most hardware companies. When PC demand started to surge, it caught tech companies off guard. All over the world, each different segment of the manufacturing supply chain started to reel, as factories began to report COVID cases among their workers, disruptions that shut down production lines for brief periods.
Some of the major companies were better able to deal with supply constraints, thanks to advance purchasing of memory and central processing units (CPUs), but even giants with major power such as Apple couldn't meet all the demand. CEO Tim Cook told analysts last October that its revenue in the September quarter would have been at least $6 billion higher, had it been able to meet all the demand, and in the December quarter it was an even greater shortfall.
Incredibly, the most challenging supply chain issue revolved around the paucity of small and seemingly inconsequential chips, some of which cost about $1 each, such as video drivers and audio drivers. These tiny chips, because they were on older manufacturing processes, are made by smaller, lesser known companies. In addition, these chips, especially the ones for screens, had huge competition from TVs, cars, anything with an LCD panel, said Mikako Kitagawa, a Gartner Inc. analyst.
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April 09, 2022 13:48 ET (17:48 GMT)
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