Tech sectors the coronavirus will hit the hardest
IT services, application software vendors, and consumer electronics may be some of the tech sectors hardest hit by COVID-19, according to GlobalData.
Beyond the cost to human life, theis inflicting severe damage on industry. As entire countries are forced to go on lockdown, businesses are losing sales and customers in unprecedented numbers. Few sectors of the business world are immune to the downturn, and that includes technology. A new report by GlobalData looks at different segments of the tech industry to see how each might fare in the wake of the virus.
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Calling COVID-19 the most significant theme to affect the technology industry in 2020, GlobalData said it will put a large strain on the global economy, which will essentially be halted for at least three months. The virus will test the financial robustness of companies and their ability to cope with extreme shocks. Many companies won’t survive this initial struggle; others will see a substantial decline in sales.
All 17 sectors in TMT (technology, media, and telecomm) analyzed by GlobalData will be hurt economically by COVID-19 in 2020, however, some segments will do better than others.
On the relative upside, cybersecurity companies will likely fare best as they are being asked to protect the growing number of remote workers from phishing and malware attacks. Similarly, telecom operators are somewhat insulated from the COVID-19 crisis as they’re called upon to provide reliable connectivity for remote work, home schooling, and crisis management systems.
Moving toward the less positive forecasts, the IT infrastructure sector will see short-term cuts to noncritical projects from data centers, but long-term infrastructure projects won’t be affected.
Jumping into negative territory, the IT Services sector will be the hardest hit, according to GlobalData. The short term will test the sector’s ability to complete existing projects while customers are in lockdown mode for several months. The long term will bring a huge slowdown in IT projects as companies scale back their spending for 2020. With many IT projects likely to be put off until 2021, application software vendors will be hit by a rough year with little new business before the final quarter of 2020.
“Costs will be stripped out of businesses, and all nonessential spending will be either cut or delayed,” Stuart Ravens, chief analyst of Thematic Research for GlobalData, said in a press release. “All IT projects that can be shelved will be shelved until at least 2021. Software vendors must prepare for a tough year where very little net new business will be won before the final quarter. The biggest losers will be software companies selling into those industries most at risk from the immediate impact of COVID-19. These include nonfood retail, insurance, travel and tourism, and real estate.”
Finally, consumer electronics companies will be hit by short-term and long-term issues as a result of the virus. Over the short term, global supply chains are essentially shut down. Even as more people who are staying at home want electronic devices to keep entertained, manufacturers won’t be able to keep up with demand. In the long haul, as the world is likely hit by a recession, consumers will be unwilling to spend money on high-end electronics.