Home Office Unleashes Demand for Chips, LaptopsMon, 03/23/2020 - 14:26
With the world entering quarantine and Mexico kicking off its Jornada Nacional de Sana Distancia (National Social-Distancing Program) - a plan designed by the Ministry of Health to slow down COVID-19 contagion - more employees are working from home. Demand has now surged for laptops, microchips and network peripherals as companies rush to build virtual offices. Cinemas, the restaurant industry and the aerospace sector have reduced earnings forecasts, anticipating a drop in consumer demand and an economic slump. Meanwhile, performance at electronics retailers and chipmakers hints at benefits from a shift in work culture.
Over the past month, governments and companies globally have been advising people to stay safe indoors. Meanwhile, South Korea, home of the world’s biggest memory chip maker, Samsung Electronics, on March 16 reported a 20 percent jump in semiconductor exports.
In Mexico, health authorities reported yesterday that the number of infected rose to 316, while the death toll remains at 2. This represented an increase of 25.9 percent compared to the number of infected on Saturday, leading companies and the government to implement more stringent social-distancing measures. “With more people working and learning from home during quarantine, there has been a rising demand for internet services. Data centers need bigger pipes to carry the traffic,” said Cape Investment & Securities Analyst Park Sung-soon in an interview with Reuters. A South Korean trade ministry official also told Reuters that cloud computing has boosted sales of server chips, “while an increase in telecommuting in the US and China has also been the main driver of huge server demand.”
In Japan, laptop maker Dynabook reported brisk demand which it partly attributed to companies encouraging teleworking. Rival NEC said it has responded to demand with telework-friendly features, such as more powerful embedded speakers.
China in the Lead
China is leading in chip demand, analysts said, after cloud service providers such as Alibaba Group, Tencent and Baidu quickly responded to the government’s effort to contain the virus. “Cloud companies opened their platforms, allowing new and existing customers to use more resources for free to help maintain operations,” said Canalys Analyst Yih Khai Wong. “This set the precedent for technology companies around the world that offer cloud-based services in their response to helping organizations affected by coronavirus.”
China’s cloud infrastructure build-up has helped to push up chip prices, with spot prices of DRAM chips rising more than 6 percent since February 20, according to data from price tracker DRAMeXchange. UBS last week forecast average contract prices of DRAM chips to rise as much as 10 percent in 2Q20t, led by a more than 20 percent demand surge in server chips.
Concerns over supply disruption have also contributed to higher prices. “You have got lots of OEMs and systems integrators in the global market who have intense demand for memory now,” said to Reuters Andrew Perlmutter, Chief Strategy Officer at ITRenew, a company that buys and reworks used data center equipment for resale. “Nobody is shutting down their factories - there is still production as normal - but people worry about memory supply, in particular, so they want to get ahead of production,” he said.
About 69 percent of electronics manufacturers have flagged possible supplier delays averaging three weeks, showed a poll from March 13 by industry trade group IPC International. Half of those polled expected business to normalize by July and nearly 75 percent pointed to October, at the earliest.