BURLINGAME, Calif.--If you're in the PC business, life is pretty bleak right now. Sales of computers are plummeting. Prices are falling, fast. Outlets selling your wares, such as Circuit City, are folding. Oh, and just about the only thing that's selling right now are low-cost netbooks, lower-cost iPods and canned food.

It could be about to get worse. Much worse. According to a report in the Chinese-language Commercial Times, Taiwanese manufacturer Wintek will supply the touch panels for an Apple (nasdaq: AAPL - news - people ) device of some kind, possibly a netbook, that will launch by the third quarter.

It's unclear, as always, what the computer and gadget maker is doing. An Apple spokesman declined to comment on "rumors and speculation," and the Cupertino, Calif.-based company is known for working hard to keep upcoming products secret. These guys just aren't big talkers, period, saying little about the health of Apple co-founder Steve Jobs, who remains out on medical leave through June.

Apple, however, has continued to publicly resist the idea of competing in the market for low-cost netbooks. Chief Operating Officer Tim Cook criticized them as "inferior" during a call with investors in January, saying only that Apple will "watch" the space.

Apple can do that, in part, because its powerful, high-end notebooks have remained steady sellers, despite the downturn. Yet it remains a little baffling, considering that Gartner predicts sales of low-cost netbooks will double to 21 million units in 2009 from 11.7 million units last year. It's also possible that Apple is working on a better idea, something that could move its iPod line up market, rather than its notebook computers down market.

Here's what we know: Apple purchased PA Semi, a chip designer that builds powerful, power-sipping processors for the U.S. military, for $278 million in cash last year. Then Apple slugged it out in court with IBM (nyse: IBM - news - people ) to grab IBM chip designer turned blade-server honcho Mark Papermaster. It then put Papermaster in charge of its iPod and iPhone hardware. And now it looks as if Apple has placed orders for a whole bunch of touch screens.

Oh, and those chips Papermaster designed? Based on the same PowerPC architecture as PA Semi's. You connect the dots.

So when does the bomb drop? We can't be sure. But Jobs is due back by the end of June, and Apple's Worldwide Developers Conference is usually slated for June as well. If Jobs strides onto the stage with his coat glossy and his eyes shiny, chances are good he'll be there to rip the lid off an economy-sized box of pain for the rest of the PC business. He could unveil a powerful, media-friendly tablet based on the iPod Touch, or some other form of multi-core, touch-screen monster.

Some people say recessions are inevitable; others say they are healthy, necessary to clean out the system and clear the way for the next expansion. Finally, while many blame greedy capitalists for pushing things too far, there are some who believe that the current recession is something we deserved (or earned) because so many lived beyond their means.

No matter what you believe, recessions are never fun. Beneath all the statistics and data are real people facing real challenges. The unemployment rate, now 6.7%, is headed to about 8% by late 2009. In the fourth quarter, real gross domestic product will drop the most since the brutal recession of 1981-1982, when, over the course of only two years, Paul Volcker reversed 20 years of inflationary monetary policy.

But it is not just the speed of the collapse that is so scary; it is that our current generation has little experience with economic pain. Between 1965 and 1982, the U.S. economy was in recession one out of every three years, inflation hit double digits and the unemployment rate peaked at 10.8%.

Since 1982, the U.S. has been in recession just one out of 16 years, the unemployment rate bottomed at 3.8% in early 2000 and then at 4.4% in early 2007. In other words, a wobbly economy today feels much worse to the average American and politician than it did 30 years ago.

So we have a real schizophrenia today. People are going to the mall for holiday shopping, parking hundreds of yards away and waiting in long lines to check out. But then these same people go to parties and argue about whether the Obama economic stimulus plan should be $500 billion or $1 trillion. It feels so bad that President Bush is justifying his economic intervention by saying that "I've abandoned free-market principles to save the free-market system."

What's important to recognize is that even at the bottom of the current recession, sometime in mid-2009, the living standards of the typical American will still be amazingly high. In fact, even an aggressive contraction in real GDP will leave per-capita real GDP above 2005 levels.

Now, we did not have 8% unemployment back in 2005, but that kind of jobless rate is not unusual for recessions. The unemployment rate peaked at only 6.3% in the recession early this decade but peaked at 7.8%, 10.8%, 7.8%, and 9% in each of the previous four recessions, respectively, dating all the way back to the 1973-1975 recession.

Credit card defaults could rise to 10% in the next quarter, as borrowers throw in the towel and stop chasing lifestyles they can't afford.

This is likely just a preamble for 2009, when default rates could spike much higher, according to Innovest Strategic Value Advisors. But even the 10% figure is much higher than previously anticipated, and credit cards could follow mortgages as the next great calamity.

The surprise is that the credit card industry's own belated attempts to whip itself into shape are causing the damage, according to Laura Nishikawa, an analyst at Innovest. She noted that credit card issuers are helping drive debtors into default by reducing credit lines, limiting access to home credit lines and, as mentioned, killing roll-overs. Nishikawa said these measures have had unintended consequences and are driving customers away from paying their bills.

Partly to blame for the upcoming correction, of course, is the credit card lifestyle. According to Innovest, since 1999, as wages have stagnated credit card debt outstanding has risen by almost 80%. It's only gotten worse as access to home equity lines have been shut down. Rather than stop shopping people have simply put their purchases on plastic.

Walter Todd, a portfolio manager at Greenwood Capital Associates was quoted by the Calgary Herald in late November, noting that there has never been this much consumer debt with unemployment nearing 8%: "It's hard to run a model because it's never happened before."

The worst is yet to come, Innovest says, because 2006's bankruptcy reforms have caused a delayed reaction in defaults. The firm expects the full tide of defaults to roll in early in 2009. Happy inauguration, President Obama.

Where Storage Goes Next

The limits of physics demand that gadget masters make a great leap forward in storing data.

Microprocessors get most of the attention that comes to semiconductors because of the godlike feats of math and logic they perform. But humble memory and storage devices have driven most of the advances in consumer electronics the last few years.

Each successive iPhone or iPod Shuffle is cooler than the last because of the continuing decline in flash memory prices. Key-chain USB flash drives can now hold a complete DVD movie, and can be made so cheaply that they're given away as trade show souvenirs. A 1-terabyte magnetic disk drive the size of a paperback book that costs $100 will hold a lifetime of videos from even the most tireless household documentary maker.

The combined global industries of disk storage and semiconductor memory are worth $90 billion a year. But in memory, especially, it's an era of profitless prosperity. So many manufacturing plants have been added by Korean, Japanese and U.S. firms in the last several years that the market is glutted with chips, leading to low prices for consumers and no profits for manufacturers.

Another crisis is looming for memory makers, this one involving physics. Chips have gotten so dense, so crammed with data, that they've come close to the end of the road in terms of what atoms can do for you.

The very first commercial memory devices, called core memories, were made in the 1950s and required several intersecting wires, along with a ceramic ring that could slip over a sewing needle, to hold a single bit of a data. Today the silicon chips used in the most critical applications, like the high-speed random access memory in a desktop computer, have become so dense that the storing of a bit is entrusted to a mere 100 electrons. That takes even the most precise manufacturing to the point where one cannot be sure a zero or one has been stored properly. The improvements in memory that gadget hounds have come to take for granted are endangered.

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In response, memory makers like Intel (nasdaq: INTC - news - people ) and Samsung are beginning work on entirely new kinds of technologies. One of the most promising is called phase change memory, which beams tiny, precisely timed pulses of heat at a glasslike substance. Heat keeps the atoms aswim in a chaotic fashion that resists electric current. Shut the heat off and they cool into a tight crystal lattice that's highly conductive. Data are read off the chip by measuring whether the cell conducts electricity or not. Numonyx, a venture started by Intel and STMicroelectronics, recently found that two additional phases can be read, which could lead to squeezing even more information into the same space. Edward Doller, Numonyx's chief technical officer, says the overall promise of phase change is to continue memory's practice of doubling in capacity every 12 months or so for years to come.

Because phase change memory is both fast and nonvolatile, meaning it keeps its information even without power, it has the potential to become the "universal memory" the industry is seeking. Imagine a computer that combined the high and nonvolatile capacity of a magnetic hard drive with the speed of RAM into a bank of new chips. You can turn it off at night and flip it on in the morning in exactly the state you left it in the night before. (Flash memory is based on a different technology and is too slow to be used as RAM inside PCs.)