Political Impact on PC Sector

Brief Overview of the PC Industry

The PC industry presents a mixed picture with some positive indicators as well as some challenges. According to Mordor Intelligence, the PC market size is estimated at $204.7 billion in 2024 and is expected to grow to $315.42 billion by 2029, growing at a CAGR of 9.1% during the 2024-2029 period. The initial surge in PC demand during the pandemic due to remote work and remote learning has now subsided. Consumers are spending less on electronics products due to economic pressures. In the US, Pc manufacturing has significantly declined, where the top four players including HP, Lenovo, Dell and Apple account for more than 75% of the revenue. HP and Dell together enjoy more than 50% market share in the US PC segment. In the US, the top players dominate the market die to which there is intense competition for market share in the PC sector. Supply chain disruptions have continued to affect availability and pricing of parts. However, the situation has improved compared to the pandemic period.

How do Political Forces Affect PC Businesses in the US?

Political forces can significantly impact the PC (Personal Computer) businesses, influencing various aspects of their operations, market dynamics, and overall business environment. Apart from government policies and regulatory compliance there are several more factors related to government and politics that affect PC sector. Here are several ways in which political forces can affect PC businesses in the United States:

1. Trade Policies and Tariffs:

• Changes in trade policies, tariffs, and international trade relations can impact the cost of importing and exporting computer components and finished products. Trade tensions or tariffs on certain materials can affect the overall cost structure for PC manufacturers. For example, the trade tensions between the US and China have had a significant impact on the PC sector as well as several other sectors industrywide. The higher tariffs placed on imported components including processors, memory and other PC parts have driven the manufacturing costs for PC businesses higher. This has led to increased costs of PCs and laptops, potentially dampening consumer demand. According to the United States International Trade Commission website, “from 2018 to 2021, section 301 duties reduced imports of computer equipment by 5 percent, increased the price of computer equipment in the U.S. by 0.8 percent, and increased the value of U.S. production of computer equipment by 1.2 percent.”

2. Regulatory Compliance:

• PC businesses are subject to various regulations related to product safety, environmental standards, and data protection. Changes in regulations can necessitate adjustments in manufacturing processes, product design, and compliance measures, influencing costs and operations. The large PC businesses based in the US have established dedicated compliance teams to deal with regulatory compliance. Some of the leading areas where PC businesses are required to be in compliance with the necessary regulations include product safety, environmental regulations, data safety and privacy, export controls and labor and employment laws. Depending on the time of consumer data being collected, PC businesses might be required to comply with regulations like the Gramm-Leach-Bliley Act (GLBA) and California Consumer Privacy Act (CCPA). In terms of product safety too, the PC brands are required to comply with the regulations established by the Consumer Product Safety commission. The PC businesses also need to adhere to laws like the Toxic Substances Control Act (TSCA) regarding hazardous materials in components and the Energy Star program for energy efficiency standards. In this way, there are several areas where regulatory compliance is essential for businesses.

3. Government Procurement Policies:

• Government agencies are significant buyers of computers for various purposes. Changes in government procurement policies, budget allocations, or preferences for specific vendors can impact the demand for PCs in the public sector. Government agencies have their budgets set for procurement of various items including PCs. Their budgets have a direct influence on the number of PCs procured each year. Moreover, there are specific polities that dictate how agencies purchase PCs, including bidding processes, vendor qualifications, and preference for specific technologies or domestic manufacturers. Budgetary constraints, standardization as well as complex procurement processes can have a detrimental impact on PC demand. In the US public sector, the role of government procurement policies is quite complex in terms of shaping PC demand.

4. Intellectual Property and Patents:

• Political decisions related to intellectual property rights and patents can affect how PC businesses protect their innovations and technologies. Changes in patent laws or patent disputes can impact the competitive landscape.

5. Cybersecurity Regulations:

• With the increasing emphasis on cybersecurity, government regulations regarding data protection and privacy can impact how PC businesses handle customer data and implement security measures. Compliance with cybersecurity standards may require additional investments. With technological advancements happening at a fast pace, the concerns related to cybersecurity have also grown and so the government has formed stringent laws to address these issues. Since cybersecurity is a critical area of concern, the PC businesses must remain compliant with cybersecurity regulations and place a special emphasis on addressing cybersecurity related issues.

6. Government Research and Development Funding:

• Funding for research and development (R&D) in the technology sector, including PCs, often comes from government sources. Changes in government R&D funding can affect the pace of innovation and technological advancements in the industry. The R&D tax credits offered by the government can incentive investment into research and development, leading to technological advancements that will benefit the entire industry. The government can also provide direct grants to support critical research projects or to encourage the domestic production of key PC components. In this way, government can aid the PC industry’s growth and advancement through research and development funding.

7. Education and Training Initiatives:

• Government initiatives focused on education and workforce development can influence the availability of skilled labor in the technology sector. A well-educated and skilled workforce is essential for PC businesses. While on the one hand, it benefits the labor force, on the other it will help the PC brands that are looking for skilled and talented people to address the shortage of skilled workforce.

8. Environmental Regulations:

• Regulations related to environmental standards and sustainability can impact the design, manufacturing, and disposal practices of PC products. Compliance with eco-friendly standards may require adjustments in production processes.

9. Taxation Policies:

• Changes in tax policies, including corporate tax rates and incentives, can affect the financial health of PC businesses. Tax incentives for research, development, and manufacturing activities may influence business strategies. Higher corporate tax rates can affect the profitability of PC businesses. Conversely, lower tax rates can improve profitability and help with reinvestment. Similarly, taxes in imported PC components can also hurt profitability by increasing production costs. State and local tax structures can also impact consumer demand for PC in certain regions. In this way, the government’s tax policies can have a solid impact on the profitability of PC businesses.

10. Government Subsidies and Incentives:

– Government subsidies and incentives for technology businesses, especially those involved in manufacturing or research, can influence investment decisions and competitiveness. Government can incentivize the growth of the PC industry though various subsidies and incentives. Government-backed loan guarantees or tax breaks for PC businesses can make financing easier and incentivize investment into new production facilities or technology upgrades. Government can also run training programs to address the shortage of skilled labor in the PC industry. The export tax breaks offered by the government can incentivize the export of PCs and thus boose sales and revenue.

11. Global Geopolitical Issues:

– Political tensions and geopolitical issues can impact international trade, supply chain stability, and relationships with key markets. Events such as trade disputes or sanctions can have ripple effects on the global technology industry. Political tensions between the US and China have affected PC and other businesses. The government has banned certain Chinese brands from operating in the US. However, Lenovo, a leading Chinese PC brand has also come under the US government’s scanner several times. Similarly, the Russian invasion of Ukraine also disrupted supply chains affecting PC businesses in the US. The US based PC brands have also stopped operating in Russia since it invaded Ukraine.

12. Public Policy on Digital Infrastructure:

– Government decisions on digital infrastructure, including broadband expansion and 5G deployment, can impact the accessibility and speed of internet connectivity, influencing consumer demand for PC products and services.

13. Consumer Protection Laws:

– Political decisions related to consumer protection can affect warranty requirements, product labeling, and advertising practices, influencing how PC businesses interact with consumers.

14. Antitrust Regulation:

– Regulatory bodies may scrutinize large technology companies for antitrust concerns. Investigations and regulatory actions can impact the competitive landscape and market dynamics for PC businesses. The Antitrust regulations have affected the tech industry to a large extent over the past several years. Several technology brands have faced antitrust investigations over the past several years. PC businesses have also faced Antitrust allegations in the past. HP, the leading US based PC manufacturer, is also facing an anti trust charge related to its printing business.

15. Public-Private Partnerships:

– Collaboration between PC businesses and government agencies on initiatives such as smart city projects or technology modernization efforts can create new opportunities or challenges.

Given the dynamic nature of politics and policy, PC businesses must stay informed and adapt their strategies to navigate the changing political landscape. Engaging with policymakers, industry associations, and advocacy groups can be crucial for influencing policy decisions that affect the technology sector.