China’s tech sector to shrink by 10% in Q1 amid virus outbreak

China’s tech sector will bear the brunt of the ongoing Covid-19 coronavirus outbreak on the back of an expected hit on the world’s second largest economy, according to IDC.

The technology analyst firm said the macroeconomic disruption brought by the outbreak is expected to significantly affect China’s ICT market, dragging it down by about 10% in the first quarter of 2020.

Hardware makers will be hit more badly than software houses, IDC noted, adding that the negative impact on the ICT market would be confined to the first quarter before easing off in the next quarter. The full-year impact on China’s ICT market is expected to be limited.

In its analysis, IDC expects at least a 30% fall in PC and smartphone sales, and a more than 15% decline in server, network and storage sales.

The markets for artificial intelligence (AI) and big data will also be affected, though they will still grow – albeit at a slower pace – while the markets for emerging technologies, such as the internet of things (IoT), will see minimal declines.

Before the outbreak, IDC projected China’s ICT sector to grow by 10.2% this year. That projection has now been slashed to 5.5%.

Since the outbreak that originated from Wuhan this year, the Chinese government has rolled out support measures for enterprises, including investments to support production of containment supplies, fiscal and credit support, tax reduction and exemption and subsidies, and reduction of administrative fees.

“We also expect more proactive fiscal measures and looser monetary measures to be rolled out in the second quarter and the second half of the year, in addition to increasing investment in infrastructure and relevant livelihood areas, which will continuously benefit sectors including healthcare, education, telecommunications and utilities,” said IDC.

Economists expect the Covid-19 outbreak to have a greater impact on China’s economy than the Sars outbreak in 2003. Tourism, hospitality and manufacturing will be most affected, though IDC said the outbreak would have “positive impact” on healthcare, government and internet and new media sectors.