Notebooks Nonsense
We have expressed our concern that many in the CE supply chain look at the demand seen over the last year and assume (or want to assume) that things will stay this way going forward. While the residual effects of COVIS-19 lockdowns and sequestering will have some effect on the global social structure, as the COVID-19 pandemic eases, there seems to be a great desire among most to return to some more normalized way of life. Some will remain in isolation for their own reasons, and some businesses that were already moving in such a direction will carry a higher percentage of remote workers, but we have trouble envisioning a ‘new world order’ where the global population remains in front of some sort of display for most of their day. That is not to say things will change quickly, as the disparity between countries and regions as to their ability to control the virus will remain a gating factor, but unless we are speaking about a long-term generational change, we expect demand for those products that became dear during the pandemic will subside.
The timing of such changes will vary considerably, so we look at the CE space on a product by product basis, with some components that are difficult to make and require high cost and years to add capacity, remaining in demand for some time, but there are many others that have seen a big boost in demand over the last year, far exceeding the norm, that will gently return to what might be considered more normal growth.
One product category that has seen a very significant change in demand is notebooks, and a recent note from Taiwan based Trendforce, while reaming in their typical optimistic stance, ushered in the same caution that we expect to see in a number of CE products later this year. After noting that global notebook shipments were up almost 20% last year, against a more typical 3% to 4%, they expect notebook growth to approach 15% this year, but decline 6% in 2022. While that is heresy for one’s who almost always have a positive bias, they also add that they believe 3Q notebook growth will be flat and 4Q growth could be down 3%.
A considerable amount of the growth in notebook demand last year and this, has come from Chromebooks, non-Windows laptops that operate under Google’s (GOOG) Chrome OS and are designed to use the internet as a storage and application base. As these notebooks are lower in price than a Windows™ based device might be, they have been the device of choice for stay-at-home students on a global basis. Demand for Chrome books is based in the US, with only 30% of demand coming from other regions and Japan accounting for over 30% of the remainder, but as the US begins to emerge from the pandemic, demand for Chromebooks, much of which has been pulled forward over the last few quarters, will begin to slow, and Japan, whose GIGA School program has been a major demand pull, has begun to slow its procurement.
But…inventory levels are not excessive, as component shortages have limited buyers from achieving their purchase goals, so the slowdown will likely be a bit more gradual than a massive q/q shortfall, but at the same time, panel and component prices have also risen, making Chromebooks less profitable for brands such as Samsung and Acer (2353.TT), who have staked out a large claim in the space, and when there are other more profitable devices to sell CE brands will ask the question, “Chromebook? Why not just come over here and look at this wonderful smart TV that gives you the same benefits and has a 65” screen.” While the more optimistic view is that this will be just a small bump in the ‘new’ road we are on, we have no bias toward a particular product or CE producer, just 30 years of hearing the same ‘this time it’s different’ story at every cyclical juncture.
The timing of such changes will vary considerably, so we look at the CE space on a product by product basis, with some components that are difficult to make and require high cost and years to add capacity, remaining in demand for some time, but there are many others that have seen a big boost in demand over the last year, far exceeding the norm, that will gently return to what might be considered more normal growth.
One product category that has seen a very significant change in demand is notebooks, and a recent note from Taiwan based Trendforce, while reaming in their typical optimistic stance, ushered in the same caution that we expect to see in a number of CE products later this year. After noting that global notebook shipments were up almost 20% last year, against a more typical 3% to 4%, they expect notebook growth to approach 15% this year, but decline 6% in 2022. While that is heresy for one’s who almost always have a positive bias, they also add that they believe 3Q notebook growth will be flat and 4Q growth could be down 3%.
A considerable amount of the growth in notebook demand last year and this, has come from Chromebooks, non-Windows laptops that operate under Google’s (GOOG) Chrome OS and are designed to use the internet as a storage and application base. As these notebooks are lower in price than a Windows™ based device might be, they have been the device of choice for stay-at-home students on a global basis. Demand for Chrome books is based in the US, with only 30% of demand coming from other regions and Japan accounting for over 30% of the remainder, but as the US begins to emerge from the pandemic, demand for Chromebooks, much of which has been pulled forward over the last few quarters, will begin to slow, and Japan, whose GIGA School program has been a major demand pull, has begun to slow its procurement.
But…inventory levels are not excessive, as component shortages have limited buyers from achieving their purchase goals, so the slowdown will likely be a bit more gradual than a massive q/q shortfall, but at the same time, panel and component prices have also risen, making Chromebooks less profitable for brands such as Samsung and Acer (2353.TT), who have staked out a large claim in the space, and when there are other more profitable devices to sell CE brands will ask the question, “Chromebook? Why not just come over here and look at this wonderful smart TV that gives you the same benefits and has a 65” screen.” While the more optimistic view is that this will be just a small bump in the ‘new’ road we are on, we have no bias toward a particular product or CE producer, just 30 years of hearing the same ‘this time it’s different’ story at every cyclical juncture.
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