Covid-19’s Impact on Tech Will Last Well Into 2021

This week, Google announced formal plans to keep employees working remotely through to Summer 2021 in the coronavirus’s persistent presence globally.

The decision will impact more than 200,000 full time and contract workers and has made Google one of the first technology firms to extend remote work privileges through much of next year.

While Twitter has already given employees the option to work from home “forever”, Facebook, Amazon, and other tech giants have only pushed stay-at-home dates.

Apple has most of its staff working from home until January 1, 2021, but that could be extended as well. Google’s decision will likely influence more tech giants to follow suit as coronavirus numbers continue to swell worldwide, and as a vaccine continues to be at least another year away.

I consider Google’s move a smart one as they surely have insiders at the government level who tell them that they need to social distance, and create safe workplace conditions will be in place for a minimum of another year, if not longer.

With this in mind, I spoke to some of my contacts in Washington that work in Commerce and State, Their comments were off the record but, shared some of their biggest concerns for the next 12 months.

There seems to be a firm agreement from many government officials that work from home is here to stay, and they too see it being almost mandated in one form or another through the beginning of summer of 2021.
They also expect that most business events and conferences will not occur through the first half of 2021 and will almost all move to some virtual format.

CES was canceled, reflecting a trend of any in-person events being held even in early 2021. I suspect the Mobile World Conference will suffer the same fate again next year.

One concern from my contact involved with US Commerce says they have significant concerns about what they believe will be massive layoffs in Q4 2020 and Q1 and Q2 of 2020. We already know that the airline industry alone will either furlough or eliminate over 100,000 jobs in the next two quarters.

One other statistic I read today is that 60% of restaurants will not reopen due to the impact of Covid-19, meaning that hundreds of thousands of jobs in that industry will go away too.

I could detail many other areas where layoffs are imminent, but unless the US government comes in with bailouts for many industries, the number of layoffs on the horizon could have a significant negative impact on the US economy in 2021 and beyond.

CBO estimates that real gross domestic product will contract by 11 percent in the second quarter of this year, which is equivalent to a decline of 38 percent at an annual rate, and that the number of people employed will be almost 26 million lower than the number in the fourth quarter of 2019.

In terms of the impact of the layoffs on tech, most PC makers watch the layoff metrics with great concern for 2021. While hardware orders for IT are even or slightly up going into Q4 of this year, their ability to forecast demand in 2021 is very cloudy. Two PC vendors, I talk to believe that corporate PC demand will continue to see moderate demand as they continue to upgrade PC’s for IT workers sent home with older machines. As of now, they see that being somewhat stable through the first two quarters of 2021. As for the last half of 2021, its anybody’s guess as to what corporate demand will be during that period.

In my talk with my contacts involved with State and International Affairs, their biggest concern is between China and the US. As you are aware, these two countries are entering a Cold War, and it looks like the relationship with China will become icier going into the end of 2020.

They believe that this current administration will want to show they are tough on China going into the election and think that we could see new tariffs from both sides increase over the next few months. I have been fielding many client calls recently about the potential of new tariffs, so I contacted my friends in Washington.

While I could not get clarity on what new tariffs to expect, my contacts hinted that many could mirror some of the one’s in tech from the last round of tariffs, especially around PCs and smartphones.

Many PC vendors, who cannot trust the US/China relations favoring them in the future, are already moving much of their PC manufacturing out of China. However, that does not happen overnight. PC makers say that they believe they can shift most production out of China, and move the majority of the assembly to other regions so the Chinese tariffs from either side would not impact them.

During my time on advisory committees for GW Bush, I worked with a regarded economist assigned to both of these committees. He came from a major tech company and is well aware of the role and impact tech would play in the future.

I spoke with him last week and asked his important concern for 2021. He said that they (government) pretty much tossed out the idea of a V curve recovery and echoed the same interest from Commerce that the layoffs will negatively impact the US economy in 2021. He told me that they are working on good, better, best scenarios now but all point to a severe economic downturn in the first half of 2021. He also does not see any serious industry bailouts at least through Jan 2021.

All these points to what I fear will be a difficult economic period that will have to deal with no matter who is president in 2021. Tech is in the best position to weather much of this, and as I have written in the past, tech leaders tend to invest heavily in downturns to be ready for an economic upturn that eventually follows.

If there is a bright side, the American people have shown real reliance in crisis times, whether it be war or economically related. The Covid-19 pandemic will alter many people’s lives and businesses, but if history is our guide, the US will eventually get through this.

However, as all three of my Washington contacts told me, the US of the past may be very different in the future. It is just too hard to predict how much different it will be once we get on the other side of this pandemic, and life goes back to some level of normalcy.

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Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

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