Of these sectors, mining, accommodation and entertainment were the hardest hit. Between 2019 and 2020, the oil, mining, and gas extraction industry saw a 29 per cent decrease in revenue. Accommodation and food services dropped by 28 per cent, and entertainment dropped by 24 per cent.
Although these figures paint a bleak picture of the economy, they accounted for less than two per cent of all sector revenue. The technology sector accounts for 92 per cent of the highly impacted sector revenue. During the telework and remote learning transition, technology saw massive adoption and attention.
But the same hardship struck there, too. According to Crosby, the computing segment saw an overall revenue decline in key industries including PCs, multimedia, storage, and office equipment. Computer revenue fell 27 per cent, and communication revenue fell 36 per cent.
The numbers came as a surprise as notebook shipment boomed during the remote office transition. According to Gartner, PC shipment reached 275 million units in 2020, a 4.8 per cent increase from 2019 and the highest growth in 10 years. IDC pinned the shipment figure even higher at 302.6 million total units, or a 13.1 per cent increase year-over-year.
In contrast, desktop revenue declined sharply compared to notebook’s. Crosby estimated that desktop revenue fell by as much as 40 per cent, attributing to laptops’ superior flexibility compared to desktops.
Other revenue dips
Other notable sector revenue dips included multimedia and storage hardware, which dropped by 32 and 33 per cent respectively.
On the upside, commercial software maintained its healthy margins despite an eight per cent overall revenue drop. Demand for telework solutions including conference apps, remote desktops, VPN, and various other software have boomed as people stayed indoors.
The need for contactless communication increased handheld revenues as well, specifically for tablets. The healthcare sector was a big driver in facilitating this growth as tablets were vital in establishing contactless communication between patients and caregivers.
The persisting semiconductor shortage
A wedge in the ICT recovery is the ongoing global semiconductor chip shortage. Unseen demand, depleted buffer, cryptocurrency mining boom, and inclement weather have strained semiconductor manufacturing to the limit.
In addition, many semiconductor designers operate on a fabless basis, meaning they outsource their chip manufacturing to dedicated fabs, pushing them to compete for production capacity. Any buffer inventory has long evaporated at this point.
Crosby predicted the squeeze will last for at least six more months.
“We’re gonna have to watch very closely relative to supply and availability, because I think it’s not going to be driven around slower demand for products and technologies–it’s going to be ‘do we have the ability to get an end customer sale,’” said Crosby.
Coop cited some feedback about the chip shortage’s impact on the channel from larger solution providers like Long View Systems. He said Dave Frederickson, Long View Systems’ executive vice-president of sales and strategic business solutions, told him that chip shortages are impacting vendors. Orders placed in January for certain hardware have yet to make their shipping dates, he noted.
The shortage has yet to spread to major smartphone manufacturers. Crosby explained that as people stayed more indoors, there’s less urgency to upgrade their smartphones. In addition, he believes that there’s sufficient buffer inventory to hold the line for now.
However, this buffer may soon be running out. Recently, Samsung warned of a “serious imbalance” in the semiconductor industry.
In February, a winter storm in Texas knocked out power for a Samsung production plant for a whole month, causing as much as US$353 million in production losses.
Samsung isn’t alone in braving harsh weather. The Taiwan Semiconductor Manufacturing Company (TSMC) is in the middle of Taiwan’s worst drought in 67 years. The Taiwan government has been rationing water in other areas to keep TSMC’s production running.
Amid the chaos, major semiconductor manufacturers are stepping up efforts to expand production. Last year, TSMC announced a new $3.5 billion fab in Arizona. Intel also recently announced two new production sites in Arizona and opened up its fabs to make chips for other companies. Samsung, too, is considering a new $10 billion Texas chip production plant.
The new production facilities will quench chip demands, but they often take years of planning and building before production begins. Crosby suggested that the cure for the shortage will pivot on good planning, allocation and development.
As the industry struggles to rebound, Crosby isn’t ruling out the possibility of increased chip prices.
“Depending on the priority and that pressure of demand, will that ultimately drive an increase in prices? Maybe,” Crosby explained. “I think it’s something to watch, and it’s something I think you have to look at a category by category and industry by industry [basis] to see ultimately what that dominant effect is.”
One hint of Crosby’s worries is in the graphics processor market. PC component manufacturers Asus and MSI have both raised prices for their graphics cards. Due to high demand, short supply and rampant scalping, graphics cards have been going for as much as double their MSRP on reseller sites like eBay.