Terrorist Attacks Affect PC Sales

As the world deals with the human toll of Tuesday's terrorist attacks on the U.S., industry analysts say the financial repercussions will be felt in the technology industry for some time to come.

The traditional year-end peak selling season for PCs will be wiped out, and we will see a sharp drop in overall IT spending, says Market Intelligence Center, a Taiwan-based market analyst.

"The short-term inflation of international oil prices, the depreciation of the U.S. dollar, and the loss of confidence among consumers have all taken a heavy toll on America's domestic demand," MIC says in a statement. "A peak season in the fourth quarter is highly unlikely, serving only to worsen the severity of America's declining PC market."

Revising Expectations

Worldwide PC industry growth estimates for 2001 have been revised downward from 1.8 percent to as low as -5 percent, depending on the long-term impact of the attacks, the statement says. Taiwan, which is one of the world's largest producers of PCs and related components, will be "severely affected," it says.

The impact of the attacks on PC shipments is not expected to be felt immediately, despite a halt in product shipments and "a loss of control over the supply and demand of key components during the short-term," MIC says.

Most Taiwanese hardware companies maintain between two weeks and three months of inventory and there will not be a shortage of key components, it says.

Of much greater concern for PC sales, according to MIC, is the long-term effect of the attacks on global capital markets and customer confidence. Insurance claims related to the attacks, which may exceed $10 billion, will strain U.S. capital markets and result in a reduction in high-technology investments, MIC says.

Only the Essentials

In addition, corporations and consumers are less likely to purchase high-technology products that they perceive as not essential to day-to-day operations and daily life, it says.

The prospect of a slow year-end selling season would weigh heavily on Taiwan's tech sector, which has been hard hit by a global slowdown in IT demand. Many Taiwanese tech companies have pinned their hopes for a recovery on strong year-end sales, something that MIC now believes unlikely to occur.

Roughly 40 percent of Taiwan's IT hardware exports go the U.S., including 39.8 percent of all notebook PCs made in Taiwan, according to MIC.

Estimates that put Taiwan's notebook PC production value for 2001 at around $12 billion have been revised downward in the wake of this week's attacks, MIC says. Revised estimates now put expected production value for 2001 at $11.7 billion, down 14 percent compared to the previous year. The original estimate had predicted an 11 percent decline compared to 2000.