Coronavirus could impact 5G deployment, smartphones sold in China

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Smartphone displays may be just one victim of the coronavirus impact on the supply chain. (Getty Images)

Measuring the economic impact on the electronics industry from the spread of the coronavirus has become a full-time job for many analysts.

One analyst firm on Wednesday reversed an earlier optimistic forecast for smartphones shipped and sold in China for 2020 due to the virus impact on the supply chain. In a report, Omdia noted that the coronavirus has afflicted more electronics supply chains, “potentially impacting 5G deployment.”

Omdia, formerly known as IHS Markit | Technology, didn’t quantify the expected contraction in unit shipments of smartphones, but noted that China is the world’s largest smartphone market with 27% market share in 2019. It is a major, if not the largest, market for smartphone makers Apple and Samsung, among others. Omdia was formed by the merger of IHS Markit | Technology with Informa Tech.

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For all of 2019, the number of smartphones shipped to China was expected to reach 373.9 million units, a decrease of 4% from 390.8 million units in 2019, Omdia said.

Omdia had predicted as recently as third quarter 2019 that China would stop declining in 2020 and rebound. “However, due to the coronavirus crisis, Omdia now believes the Chinese market is likely to suffer another contraction in unit shipments,” Omdia said in a statement.

“The biggest negative impact will be felt in Chinese domestic sales,” Omdia added. “As the outbreak period lengthens, weakening demand will extend to other regions. The extent of the impact will depend on the duration of the epidemic.”

Omdia also said that as of Feb. 11, display fabrication use at Chinese fab facilities will decline by 20% to 25% in February, while production and output of displays will drop by 40% to 50% due to component shortages.

“Manufacturing of display panels used in products including 5G smartphones has been significantly impacted by the coronavirus epidemic, with suppliers contending with both labor and component shortages,” Omdia added.

More specifically, numerous workers are unable to report to their workplaces because of travel restrictions. The result has been shortages in LCD polarizers and LCD module printed circuit boards due to the production bottleneck and logistics problems, Omdia added.

So far the semiconductor supply for 5G smartphones and other products has remained steady, Omdia said. “However, the epidemic does raise some serious long-term concerns,” Omdia added. “If the coronavirus continues to spread and spur significant public health problems in China, electronics manufacturers in the country may be forced to slow manufacturing or even shut down some operations. This could have a significant impact on the global semiconductor supply.”

Other analyst firms are studying the impact of the virus on smartphone demand and smartphone supply chains. “This is top of mind for us,” said Ryan Reith, an analyst at IDC.

Like many thousands of others who follow the mobile technology trade, he was expecting to attend Mobile World Congress 2020 in Barcelona in late February, but the event has been canceled over fears the virus will spread. 

RELATED: Coronavirus fears kill MWC 2020 after big companies pulled out

“All phones will be impacted [by the virus] at least through the first half of 2020,” Reith said in an email. IDC believes that the Chinese government will provide a large stimulus plan to help businesses with manufacturing, logistics and supply. In addition, the government may support retail discounts to get Chinese consumers to spend on smartphones since many lost wages due to being out of work, Reith said. The timing and size of the government’s support is unknown, however.

On Monday, IDC issued a report that said spending on global information technology is forecast to grow by 5% in 2020 partly because smartphone sales will recover with 5G upgrades in the second half of the year. But the firm also said that the coronavirus outbreak will cause uncertainty in spending, forcing businesses to keep a tight rein on short term investments.

RELATED: Virus be damned, IT spending expected to grow 5% globally in 2020

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