Coronavirus panic rages on—ever more impact on electronics supply

With continuing supply chain disruption, chip sales dropped far under 2019 levels in the first week of March as coronavirus wracked markets again on Thursday. (Pixabay)

Coronavirus panic drove all three major U.S. stock markets down by 25% from their record highs on Thursday, the day after President Trump announced travel from Europe will be suspended for 30 days, and the World Health Organization declared a global pandemic.

It was the worst daily plunge for stocks since 1987, with the Dow down by nearly 10%, and the S&P 500 and Nasdaq down by more than 9% apiece. Analysts disagree whether the economy is in recession, however.

While the impact of COVID-19 has been especially profound on travel industry stocks, it has also taken its toll on semiconductor stocks and other electronics makers. Intel closed on Thursday at $45.52, down 33.5% from its six-month high of Jan. 24.

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Apple was down by 24% from its six-month high on Feb. 12, closing at $248.23 on Thursday. In addition to being hit by market-wide selloffs, Apple has seen supply shortages due to the virus, which took a toll on Chinese workers at factories making Apple products.

KeyBanc analyst John Vinh reported that iPhone sell-through was “adversely impacted” by supply issues, particularly the Pro/Max models. Stores have been running out of iPhones for two weeks and don’t know when more units will arrive, he said.

Vinh said he expects negative implications for Apple suppliers such as Cirrus Logic, Qorvo and Broadcom, which reports earnings on Thursday.

At the semiconductor level, VLSI Research reported that semi sales “dove deep under 2019 levels” for the first week of March.

IDC analyst Jitesh Ubrani said Thursday that supply constraints will force an 11% decline for smartwatch shipments in the first half of 2020, compared to the same period in 2019. In the second half of 2020, smartwatches will return to growth, up by 12% over the second half of 2019, he said.

IDC had previously said the virus will cause a smartphone shipment decline of 10% in the first half of 2020, and a 9% decline for all of 2020 for desktops, notebooks, workstations and tablets.

RELATED: Coronavirus to rob smartphone recovery in 2020, IDC says

“We expect the road to recovery for China's supply chain to be long with a slow trickle of labor back to factories in impacted provinces until May when the weather improves," said Linn Huang research vice president, for Devices & Displays at IDC. "Many critical components such as panels, touch sensors, and printed circuit boards come out of these impacted regions, which will cause a supply crunch heading into Q2."

"There's no doubt that 2020 will remain challenged as manufacturing levels are at an all-time low and even the products that are ready to ship face issues with logistics," added Ubrani. "Lost wages associated with factory shutdowns and the overall reduction in quality of life will further the decline in the second half of the year as demand will be negatively impacted."

Cisco Chairman Emeritus John Chambers predicted Thursday it will take three to five quarters for markets to adjust to the coronavirus disruption in an interview on CNBC. As the founder of JC2 Ventures, Chambers also predicted that the venture capitalist community will “pause” in making investments in startups. Noting that there aren’t enough startups at the current time compared to historic levels, he predicted that VCs still “will fund those startups in good shape.”

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