Coronavirus effects ripple through electronics industry

Coronavirus could delay reopening of currently shuttered plants and reduce production of electronics parts such as memories and displays, as well as consumer electronic products.
The spreading coronavirus has delayed reopening of China-based electronics plants and is forcing many companies to curtail travel to China as well as other global events. (Pixabay)

Plans to quarantine workers, delayed plant openings and store shutdowns, travel disruptions, and ongoing uncertainty among citizens and businesses prevailed this past week as the spreading coronavirus continued to wreak havoc in the electronics industry.

With over 300 deaths and 17,000 confirmed cases in China alone, coronavirus is poised to eclipse the SARS epidemic in 2002-2003 in terms of impact. Given how China has grown as a manufacturing center in the global economy in the past two decades, the ripple effects of coronavirus become even more pronounced.

Global electronics manufacturers with a strong China presence, such as Apple, plan to resume production early next week after the extended Lunar New Year holiday period. But it will be far from business as normal.

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During its recent earnings call, Apple CEO Tim Cook said its suppliers were aiming to resume operations on February 10, delayed from the beginning of February. Cook added that its retail stores in China have reduced their hours and are resorting to measures such as deep cleaning to hopefully stem the spreading of the virus.

Global contract manufacturer Foxconn, Apple’s key manufacturing partner in China, was quoted in a report on 9to5mac.com that when it officially resumes operations February 10, workers from outside Henan province, site of its main Zhengzhou factory, would be quarantined for 14 days. Workers residing within Henan province would reportedly be quarantined for 7 days. The report noted that the plan is feasible because many workers live onsite during their work weeks.

Elsewhere, global companies announced quarterly results that acknowledged the spreading virus could impact near-term operations and financial performance.

In a Wednesday earnings call, Qualcomm said it was reducing its low end of guidance for its second fiscal quarter due to "significant uncertainty" with the virus' impact on  cellular handset demand and supplies. 

RELATED: Qualcomm cites coronavirus uncertainty in lowered guidance

Japan-based Sony recently raised its quarterly guidance due to continued strong sales of its image sensors used in smartphones. However, Sony’s Chief Financial Officer Hiroki Totoki was quoted as saying the coronavirus could affect the company downstream. In another online report, Totoki explained that the production of smartphones that use Sony’s image sensors could be affected and thus trickle down to Sony. Sony also acknowledged that coronavirus could affect production of its PlayStation 4 gaming hardware.

Other global electronics companies appear to be taking more of a wait-and-see attitude. In a statement, Intel said “The safety and well-being of all of our employees is our top priority. As a precaution, we have implemented travel restrictions in line with guidance provided by the Centers for Disease Control recommending against nonessential travel to China. We’re monitoring the situation closely and working to ensure that our employees in China and elsewhere have the information and resources they need to stay safe.”

Components supplier AVX Corporation stated recently, “We anticipate only minimal impacts on our supply chain and our ability to deliver products to our customers. None of the AVX facilities are located in a quarantined area and none are close to Wuhan.” The company added, “We are ensuring that all potentially impacted facilities are updating their pandemic response plans. Further, we are evaluating secondary impacts on shipping and sourcing of key materials to minimize any secondary impacts.”

Companies also differ on whether coronavirus would have material effects on future financial performance.

Apple’s Tim Cook, for instance, said in its recent conference call the company would broaden its first quarter guidance to account for possible coronavirus effects. However, component supplier Vishay Intertechnology Inc., in its recent quarterly earnings announcement, said its first quarter guidance did not account for any possible coronavirus effects.

Travel plans cancelled

Given the ever-increasing global nature of commerce, traveling between various countries to attend events or visit customers or partners, including China, is a given part of many businesses. However, concerns over the spreading of coronavirus concerns have thrown a monkey wrench into business travel plans.

Already, major companies such as Google, Facebook, and Microsoft have told employees not to travel to China. Airlines are also cancelling or considering cancelling flights there. But coronavirus concerns are also starting to be felt with global events in other locales, including major trade shows and conferences.

In a Yahoo report, South Korea's LG Electronics said it would withdraw from exhibiting and participating in the Mobile World Congress in Barcelona, Spain, citing concerns over the coronavirus outbreak. Mobile World Congress is an annual telecom industry event that draws more than 100,000 visitors to Barcelona and is scheduled for February 24 through 27.

LG is not alone. Another online report, on GSMArena.com, said telecom provider ZTE will also cancel a press conference at Mobile World Congress, citing secondary effects of the virus outbreak, as well as practical issues with travel and visa delays.

To allay concerns, GSMA, which sponsors Mobile World Congress, issued a statement outlining the actions the sponsor is taking to ensure the exhibition goes on as scheduled. Measures would include increased cleaning and disinfecting of high-volume touchpoints such as catering areas, entrances and exhibits, and touchscreens. There would also be disinfecting and sanitizing materials available for public use as well as increased onsite medical personnel.

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