Tech Companies Reckon With the Pandemic

So the iPhone SE comes out in April. We are expecting the next low cost Pixel, the $400 Pixel, which would be the Pixel 4a, to come from Google within about a month. Earlier this month or late last month, Samsung put out its low cost phones. They have phones that range from like $150, $200 up to about five or $600. So the spring is the time of year for the low cost phone. I think the really important tell here, will be in the fall, because in the fall is when the big flagships come out, the $1,000 phone, the $1,400 phone. If the economy is still not moving, which we fully expect that it will not be moving by September or October, when the higher priced devices come out, I think that's when we're going to see the real impact of the pandemic on consumer spending, specifically around smartphones, because it might make sense to buy a $300 phone or a $400 phone right now, and it is probably not going to make sense to buy $1,000 or $1,500 phone come October.

LG: I think you're right. I think that there are going to be some lagging indicators here and that we won't see the full effects of the pandemic on the electronics business until perhaps, later in the year. And that's for a couple of reasons, I mean one is that all of the products we're seeing launch right now, whether it's the Samsung Galaxy phone that launched in February, the Samsung Galaxy tablets and the iPad Pro that launched last month, this month, there's a new iPhone. All of these things were planned out so many months in advance, that they were pretty much already done, right, by the time the new year came around.

And so I think we're starting to see things that were planned for the first quarter of this year launch as planned. It might be some of the later products that could be affected either by disruptions to supply chains or, as you're pointing out Mike, consumer demand. I mean the current unemployment levels, they're pretty bad. It was reported today that 5.2 million people filed for unemployment this week in the U.S., and now that's up to 22 million people total, I believe since the start of the shelter in place sort of orders that went into effect. And the joblessness is really, really bad.

And one economist I spoke to for a story on last week said that in a recession, the first consumer goods to go typically are durables, which includes discretionary gadgets. So we're going to see these interesting trends sort of arise where certain gadgets, for example, the demand for PCs has been really high right now because everyone's working from home, and they're also homeschooling their kids. And people need to figure out solutions in order to get their jobs done, to help their kids, or a family might just need a laptop so they can stay connected to the world right now while they're home. But there are probably some other gadgets that they won't be deemed as necessary. Now smartphones, of course, I think a lot of people would argue they're pretty necessary in our lives right now, but the question is going to be the upgrade cycle. The upgrade cycle was already slowing by the time this pandemic really hit. And so I wouldn't be surprised if we see a lot of people resisting upgrades for a lot longer.

MC: Yeah, I think a phone is absolutely essential. There are a lot of people in this country and elsewhere in the world for whom their phone is their only computer. It's the only thing that keeps them connected to the internet. And if that phone breaks, they're going to need a new one. However, there are a lot of people who are going to just deal with a phone that's old or doesn't really work that well or has a cracked screen for a lot longer than they would normally deal with it, because they don't have a job, or if they do have a job, but they're just nervous about spending money. As far as like discretionary goods, yeah, people are not going to be buying soundbars. People are not going to be buying OLED televisions. People may not even be buying like new cars, just keeping things running for as long as possible, just so they can avoid new expenses. And honestly, I think that's fine. It may not be great for the economy, but you probably will get just as much use out of last year's phone or two years ago's phone or six years ago's car as you would out of something that's brand new.

April 18, 2020