How the Coronavirus is Disrupting the Tech Industry
Shanghai/China-Jan.2020: New type coronavirus 2019-nCoV pneumonia in Wuhan has been spreading into many cities in China. People wearing surgical mask sitting in subway in Shanghai via Shutterstock
With the fear of Coronavirus spreading worldwide, so does the fear of a Global economic downturn. Coronavirus is disrupting the tech industry by affecting the availability of mobile phones, personal computers and automobiles.
When comparing how an outbreak of the Coronavirus may affect the global supply chain, Mirko Woitzik, a risk intelligence expert at German consulting firm Resillience360, compares the Coronavirus outbreak to events like the 2016 Fukushima earthquake and tsunami - and the 2011 flooding in Thailand.
At that point in time, Thailand was producing 40% of the world’s hard disk drives. After the flooding, many production facilities were left inoperable – which resulted in a parts shortage that reduced PC production for months. The U.N. Office for Disaster Risk Reduction estimated that the 2011 flooding caused a 2.5% reducing in the world’s industrial production.
It is impossible to measure the risk of the virus right now, but to put it into context we can analyze how the fear of spreading has impacted global giant Apple. Apple, who is extraordinarily dependent on China for parts, sales and production, announced on February 3 that “Out of an abundance of caution and based on the latest advice from leading health experts, we’re closing all our corporate offices, stores and contact centers in mainland China through Feb. 9”.
Transportation in China has been restricted, as has air travel. The borders with Russia, Mongolia and Vietnam have all been closed. Many countries are quarantining visitors from China. As a result, Foxconn – Apple’s primary manufacturer – cut their revenue growth guidance for this year to 1% to 3% from 3% to 5%. The potential impact of the virus is the cause for the cut.
Apple is not the only company feeling the impact of the Coronavirus. A company spokesperson for Dell says the company is “assessing all options and mitigation plans to help ensure our supply chain remains operational and we’re meeting customers’ needs.”
The story at HP is much the same. The company released a statement saying “Out of an abundance of caution, we have implemented certain travel restrictions for HP employees traveling to, from and within Asia Pacific.
The fear of the Coronavirus as also triggered the cancelation of the Mobile World Congress. The MWC is the largest wireless industry trade show, where over 100,000 guests were anticipated to attend.
Only time will tell how much of an impact the Coronavirus will have in terms of disrupting global supply chain.
Story via Barron’s
