Chromebook Conversation
Back in August we noted that Quanta Computer (2382.TT), the largest notebook OEM, indicated that it expected to ship less notebooks in 3Q than in 2Q, a result of waning Chromebook shipments, which represented ~17.2% of total notebook shipments in 2Q, up from 12.1% in 2Q 2020. While there has been a push in the US to get kids back into physical school, which has lightened demand for notebooks/Chromebooks in the education market, demand from the corporate market has kept notebook demand strong, but Chromebooks are less apt to be purchased for corporate use. Early projections for global Chromebook shipments are for a q/q decline of between 15% and 20%, and while we believe the push toward in-person education in the US has reduced demand to a degree, we believe there is another factor that has also contributed to the reduction in Chromebook demand.
Japan had instituted a program in 2018 (pre-COVID-19) called GIGA (Global & Innovation Gateway for All) that funded the purchase of laptops, Chromebooks and tablets for the education market, with 2/3rds of the $2.2b US in funding going toward hardware. The Japanese education system at that point had been operating under the “If its’s not broken, don’t fix it” theory, as ‘chalkboard’ test results continued to be strong, but COVID-19 changed all that when it was found that far fewer students were equipped to learn remotely than previously thought and tight educational budgets had done little to alleviate that problem before the pandemic. The original program was to continue through 2024 but with the appearance of COVID-19 much of the spending was pulled forward.
The GIGA program allocated ~$450 for each student with the objective of “One device for one student” and incentivized schools to make those purchases in 2020 or lose 10% of the allocation, so much of the program spending was allocated last year and early this year, however thus far the program renewal, which was to come in 4Q, has yet to be approved, possibly a result of the country’s governmental reshuffling and there seems to be similar delays in approvals for other APAC countries for similar programs leading to what looks to be the first quarter where Chromebook shipments have declined since 4Q ‘19.
While Chromebook brands are mixed about the prospects for the segment going forward, in the US the FCC has tapped into its “Emergency Connectivity Fund”, a $7.17b program that Congress approved as part of the American Rescue Plan of 2021, that will allocate funds for schools and libraries provide tools and services that are needed for remote learning. While the program will cover “reasonable costs of laptop and tablet computers; Wi-Fi hotspots; modems; routers; and broadband connectivity purchases for off-campus use by students, school staff, and library patrons”, there was a limited window for applications, approximately six weeks between June 29 and August 13 and a 2nd ending October 13. The FCC will review all applications on ‘rolling basis’. Not surprisingly, New York, California, Texas, and Florida were the states with the largest requests for funding, with total requests of $5.137b. Spending for the program as its stands today, must be made by June 30, 2022.
A number of Notebook OEMs have indicated that they are pursuing the education market beyond High School and commercial customers by increasing the size of Chromebook products, but many are expecting the FCC program to keep Chromebook shipments strong through much of next year, even with the slowdown in Japanese procurements. Whether ECF participants spend allocations in 4Q or 1Q, there seems to be a limited window for Chromebook shipments to grow, with hope from producers that such programs will be continued into 2023. However the success of the COVID-19 vaccine programs, both in the US and globally, will certainly have an effect of Chromebook demand, and while we do not expect such demand to disappear in 2023, we do expect to see demand level off next year.
Japan had instituted a program in 2018 (pre-COVID-19) called GIGA (Global & Innovation Gateway for All) that funded the purchase of laptops, Chromebooks and tablets for the education market, with 2/3rds of the $2.2b US in funding going toward hardware. The Japanese education system at that point had been operating under the “If its’s not broken, don’t fix it” theory, as ‘chalkboard’ test results continued to be strong, but COVID-19 changed all that when it was found that far fewer students were equipped to learn remotely than previously thought and tight educational budgets had done little to alleviate that problem before the pandemic. The original program was to continue through 2024 but with the appearance of COVID-19 much of the spending was pulled forward.
The GIGA program allocated ~$450 for each student with the objective of “One device for one student” and incentivized schools to make those purchases in 2020 or lose 10% of the allocation, so much of the program spending was allocated last year and early this year, however thus far the program renewal, which was to come in 4Q, has yet to be approved, possibly a result of the country’s governmental reshuffling and there seems to be similar delays in approvals for other APAC countries for similar programs leading to what looks to be the first quarter where Chromebook shipments have declined since 4Q ‘19.
While Chromebook brands are mixed about the prospects for the segment going forward, in the US the FCC has tapped into its “Emergency Connectivity Fund”, a $7.17b program that Congress approved as part of the American Rescue Plan of 2021, that will allocate funds for schools and libraries provide tools and services that are needed for remote learning. While the program will cover “reasonable costs of laptop and tablet computers; Wi-Fi hotspots; modems; routers; and broadband connectivity purchases for off-campus use by students, school staff, and library patrons”, there was a limited window for applications, approximately six weeks between June 29 and August 13 and a 2nd ending October 13. The FCC will review all applications on ‘rolling basis’. Not surprisingly, New York, California, Texas, and Florida were the states with the largest requests for funding, with total requests of $5.137b. Spending for the program as its stands today, must be made by June 30, 2022.
A number of Notebook OEMs have indicated that they are pursuing the education market beyond High School and commercial customers by increasing the size of Chromebook products, but many are expecting the FCC program to keep Chromebook shipments strong through much of next year, even with the slowdown in Japanese procurements. Whether ECF participants spend allocations in 4Q or 1Q, there seems to be a limited window for Chromebook shipments to grow, with hope from producers that such programs will be continued into 2023. However the success of the COVID-19 vaccine programs, both in the US and globally, will certainly have an effect of Chromebook demand, and while we do not expect such demand to disappear in 2023, we do expect to see demand level off next year.
Aggregated Chromebook Shipments - Source: SCMR LLC, Various
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