Under the impact of the COVID-19 outbreak, the notebook supply chain is facing many challenges in work resumption delays, labor shortages, material shortages, and logistic/transportation restrictions. TrendForce is hereby lowering its February notebook shipment forecast from 10.8 million units previously to 5.7 million units, a 47.6% decrease YoY.
During the 1Q20 period, notebook shipment is expected to take the brunt of the impact in February. Assuming that the spread of COVID-19 can be contained, notebook production volume is expected to gradually recover in March, but this may not be enough to offset significant losses in February. TrendForce is therefore further revising its 1Q20 notebook shipment forecast from the previous figure of 35 million units down to 27.5 million units, a 35% decrease QoQ and 26% decrease YoY. If the COVID outbreak were to further affect Chinese notebook manufacturers and related industries, 1Q20 shipment may decrease more than current projections.
According to TrendForce, China is the main supplier of many complex parts involved in notebook manufacturing, such as PCB, batteries, hinges, polarizers, passive components, metal components, etc. In the short run, these parts cannot be easily supplied by other manufacturing regions outside of China. As many Chinese provinces tighten their disease control measures (that is, province-wide and citywide quarantines), even the farthest-upstream supplies of metal ores are starting to be cut off. Thus, despite the successful work resumption at component factories, the outbreak will affect component output and in turn the production schedule of notebooks.
In addition, some notebook ODMs have partially resumed operations on Feb. 10 and Feb. 17, but work resumption rate remains low because the outbreak is yet to be contained. Even ODMs with a relatively high work resumption rate have to contend with a low capacity utilization rate due to material shortages and logistic issues. Given current circumstances, TrendForce forecasts a minimum recovery period of at least one month before overall notebook ODM production capacity can return to normal levels, with a gradual ramp-up in utilization rate starting in April or May at the earliest.
Chromebook bidding demand may be deferred
Generally speaking, demand for educational-use Chromebooks surfaces in February as bidding wars start. However, with the current shortage of labor and materials, whether brands and ODMs are willing to invest their capacities in making low-ASP Chromebooks remains a major uncertainty. Furthermore, the shipment schedule of Chromebooks must align with the start of the new semester. Should suppliers be unable to ship Chromebooks due to logistic problems, it remains to be seen whether the demand for educational-use Chromebooks, driven by bidding wars, can be deferred to the start of 3Q20.