Disruption to tech manufacturers and global supply chains

Manufacturers across the globe are not only working to protect their workforce and communities but are also contending with the full range of effects to their supply chains, to their operations and the economy at large.

Supply chain analytics provider TrendForce has issued a report assessing the likely impact of the Coronavirus outbreak on companies involved in tech manufacturing. The report highlights many aspects of the industry, so it’s worth reading but a few key points have been summarized below:

• At the center of the Coronavirus is the important worldwide manufacturing hub of Wuhan, China. The recent spread to other major manufacturing hubs further impacts the global economy and supply chains in profoundly disrupting ways. Several fiber optics suppliers are based in Wuhan and account for 25% of global production. China’s 5G deployment could be disrupted due to the greater need for optical fiber cables in next-generation base stations.

• Smartphone production is projected to decline 12 percent year-on-year this quarter. The labor-intensive supply chain, is being hit by the postponement of work resumption, and there will also be shortages of upstream components like camera modules.

The epidemic has caused many major disruptions in regard to the supply chain. Even as some factories return to normal, Samsung, Apple and other smartphone makers are preparing for a hit. Many have acknowledged that as a result of the virus, few smartphones will be shipped to international markets – compared with the numbers recorded prior to the coronavirus outbreak.

• Video game console manufacturing has been adversely affected but next-generation production shouldn’t be impacted as long as the outbreak can be reduced by the end of this quarter – as the PS5 and Xbox Series X will be launched in the holiday season. Current consumer numbers for the PS4 and Xbox One have already declined due to anticipation of the upcoming machines.

Quarantines, blocked roads and checkpoints are preventing millions of workers from returning to their jobs. Consumer demand inside China has dropped significantly, and international demand for Chinese products could soon follow as the virus spreads across key Chinese markets namely, Italy, Iran and the United States. It has been reported that electronics manufacturers actually expect the delays to average five weeks, which is significantly longer than the quotes they are receiving.

Without question, the electronics and automaker sectors are preparing for the hardest hit. Apple has warned investors not only about supply-chain disruptions but also a sudden drop in customers in China. Apple generates around 15% of its revenue from China and many of its products are manufactured there.

According to a Market Watch report, Apple is not expecting to meet second-quarter financial guidance because production has delayed or halted in China due to the coronavirus outbreak. “Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” the company said in a statement on Monday. Some experts find it too early to say when manufacturing and suppliers will resume normal activity, but most are certain that companies across sectors, will experience significant losses as a result of the coronavirus outbreak.