In the worst case, the new coronavirus epidemic spreads across the globe, causing the global equipment market to show an "L" shaped decline curve that can only be recovered after one or two years, IDC said.
According to IDC, in this situation, large global events, such as the Summer Olympics in Tokyo in 2020, will be in chaos. The entire recovery process may take several years.
Under this scenario, IDC's expectations for the smartphone market will be reduced to -10.7%, while the expectations for the personal computing device market will be reduced to -14.6%.
If a "V" -shaped recovery curve appears, IDC believes that personal computing equipment may have strong momentum in the second half of the year and will raise its forecast from -6.8% to -5.6%.
The following is an assessment of the impact of new coronary pneumonia released by IDC on the global terminal device market
IDC Information summarizes the basic statistical data, insights and assumptions in a series of breaking news about the new coronary pneumonia epidemic, and the impact of the epidemic on the terminal equipment market as of March 3, 2020.
Affected by the new type of coronary pneumonia epidemic, manufacturing, transportation, logistics and other industries in many key technology industrial centers in China have been brought to a standstill, resulting in the postponement of resumption of work after the traditional Lunar New Year holiday.
After delaying the planned factory shutdown to a few weeks, many companies have resumed work since February 17. The impact on logistics, labor supply, and transportation may last for weeks or even months. Therefore, the new coronary pneumonia epidemic has begun to affect the global equipment market in 2020.
The following are the basic statistics, insights and assumptions we summarized in a series of breaking news about the new coronary pneumonia epidemic in the past few weeks, and the impact of the epidemic on the terminal equipment market as of March 3, 2020:
According to the World Health Organization (WHO) daily situation report, more than 90,893 confirmed cases worldwide, of which, a total of more than 10,566 confirmed cases in 72 countries outside China.
Suppliers rushed to produce parts at the end of the year, making parts inventory very abundant, but the logistics outage brought the operation of major global supply chains to a standstill.
Factories, roads, and transportation have resumed one after another this week, but due to the isolation of the epidemic and its subsequent policies, China's key technology industry centers will be severely impacted.
The provinces most affected by the epidemic are distributing production bases for key components such as panels, touchscreen sensors, optical and electronic components, and printed circuit boards.
According to the current situation, the equipment manufacturing industry will suffer significant losses in February, and uncertainty will increase in March and beyond. It is necessary to wait until the epidemic situation stabilizes before judging.
On February 17, Apple issued a statement saying that due to the impact of the new coronary pneumonia epidemic, quarterly revenue forecast will be difficult to meet expectations, and more companies will do the same.
IDC believes that the outbreak of a new type of coronary pneumonia will bring us more uncertainty than in the past. We propose three types of scenarios for the impact of the epidemic, namely optimistic scenarios, probabilistic scenarios, and pessimistic scenarios. Each scenario hypothesis will be analyzed in depth later. IDC makes predictions based on probability scenarios, that is, "U" shaped service curves. The following is a brief introduction to these three categories of scenarios:
Optimistic scenario: Under optimistic conditions, the impact on the supply chain will end this quarter. China's demand in this quarter will be subject to large-scale demand, but will return to normal immediately thereafter.
Global sales of smartphones and personal computing devices (PCD) will recover, showing a "V" shaped recovery curve in 2020.
Probabilistic scenario: This scenario is based on the premise that traffic is continuing to be blocked and Chinese workers are making slower progress in returning to work, describing a multi-quarter recovery process for manufacturing and logistics activities.
China's demand shock will last for several quarters, but the situation will ease by the end of the year under government stimulus and subsidy policies. Global sales of smart phones and personal computing devices will show a U-shaped recovery curve in early 2021, while demand in surrounding areas will also be temporarily suppressed.
Pessimistic scenario: Under pessimistic conditions, the supply chain disruption throughout the year will still exist, and logistics and transportation will be affected to a similar extent. The epidemic spreads across the globe, and new types of coronary pneumonia will cause a global economic recession while taking a lot of lives.
The global equipment market is in the shape of an "L" -shaped recession. Buyers โconfidence has declined, budgets have tightened, and the entire industry has been reshuffled. It will only recover after one or two years.
The following graphs are the annual growth forecasts of global personal computing devices and smartphones in various scenarios from the first quarter to the fourth quarter of 2020:
Data source: Basic map from Johns Hopkins University Engineering and Systems Science Center February 19, 2020 Data Source: Basic map from Johns Hopkins University Engineering and Systems Science Center February 19, 2020
What the "V" recovery curve means
The "V" recovery curve means that China's major key technology industrial centers will quickly recover after large-scale city blockades and factory shutdowns. Supply-side shipments were hit hardest in the second quarter of 2020 and returned to normal in the third quarter. The impact on the demand side is limited to China. With the warmer weather in May, a large number of Chinese shoppers will effectively support the recovery of demand. For smartphones, we lowered our full year forecast for 2020 from + 1.5% to + 0.8%.
As for personal computing devices, if the momentum is strong in the second half of the year, we will raise our expectations from -6.8% to -5.6%. (Note: The increasingly fierce trade war is the main reason for our conservative US and Chinese market forecasts.
If the first phase of the trade agreement was reached and there was no impact of the new type of coronary pneumonia, IDC would have raised its forecast for 2020.)
What the "U" recovery curve means
The U-shaped recovery curve indicates that the impact of the epidemic will last for several quarters. In this scenario, the lowest point is still the second quarter of 2020, when the supply chain performance is weak until the third quarter.
The situation began to recover in the third quarter of 2020, but the supply chain recovery at the end of the year still lags behind demand (although it is relatively close).
The large demand will help the market recover slowly during the period from the end of 2020 to the beginning of 2021. Although the impact of demand will spread to other parts of Southeast Asia, it will be eased in early 2021.
Here, we will lower our smartphone market forecast from + 1.5% to -2.3% and the personal computing device market forecast from -6.8% to -9.0%.
What the "L" shaped decay curve means
Under this scenario, the impact on China's manufacturing and logistics will continue for a whole year. Due to epidemic prevention and control inspections and factory shutdowns, the operation of the equipment assembly and supply chain was interrupted in stages and entered a stop-and-go state.
Due to the uncertain outlook of the epidemic, the confidence of Chinese consumers and employees has been sluggish, and the factory has not been able to optimize its production capacity throughout the year.
The recession in the world's second largest economy has affected other countries, forcing companies to permanently close or adjust to new realities, and it will also cause major market, channel, and supply chain shocks.
In areas where travel bans and customs detentions have been implemented, travel, transportation, and logistics will be significantly affected.
Large global events, such as the Summer Olympics in Tokyo in 2020, will be in chaos. The entire recovery process may take several years.
In this scenario, our expectations for the smartphone market will be reduced to -10.7%, and our expectations for the personal computing device market will be reduced to -14.6%.
Finally, when we look at how equipment markets, consumer confidence, global supply chains, and the global economy reacted during major outbreaks (such as SARS, bird flu, and Zika virus), we found one thing in common: In cases, humans can always find a solution. Although the outlook is uncertain, recovery (from global markets to consumer confidence) is beyond doubt.
Modern humans may not have experienced such a large-scale epidemic, but we have survived every previous epidemic.
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