As the COVID-19 outbreak — coronavirus — continues in China and spreads around the globe, the health impacts and risks are on everyone’s minds. Companies in the tech industry, however, have added — and justified — concerns.
One of the first coronavirus-related shockwaves to hit the tech industry was limitations on travel. In late January, CNN reported that Facebook, Microsoft, Google and others took the advice of the U.S. Centers for Disease Control and Prevention (CDC) and told employees not to travel to China. Companies took these measures in an attempt to protect their employees and prevent transmission of COVID-19, which is highly contagious and spreads rapidly. Healthline reports that infected people can carry the coronavirus for up to two weeks before they show symptoms, which is why people who have traveled to China or come in contact with an infected person have been quarantined for 14 days.
The outbreak and quarantines also stopped work in early Q1 2020 in China longer than expected. News of the coronavirus outbreak coincided with the Lunar New Year Celebration. As a result, China extended the holiday by a week or more to try to contain COVID-19, and in some cases, entire cities were quarantined.
Tech industry leaders are canceling otherwise-annual conferences, such as the Mobile World Congress that was planned for February 24-27 in Barcelona. Other event planners are advising attendees to watch for updates on conferences planned for later this year.
COVID-19’s Impact on Production
Global market intelligence provider TrendForce issued a press release on its analysis of the impact of the coronavirus outbreak on specific segments of the technology industry as of February 14, 2020, including:
- Semiconductors: Because semiconductor production has a high degree of automation, this segment should be least impacted compared to many other industries. However, shipments could decline and, in turn, impact outsourced semiconductor assembly and test (OSAT) companies.
- Memory: In anticipation of the Lunar New Year holiday, companies were well-stocked on materials, so shortages are unlikely, as long as additional materials can be imported.
- Panels: Back-end module and downstream manufacturers and ODMs, production and prices are uncertain due to quarantines and labor shortages.
- Optical Communications: Of all global fiber optics production capacity, 25 percent is found in Wuhan, China, which is under quarantine, disrupting the optical fiber supply chain.
- IoT: Production continues now, but new products could be delayed due to stoppages in research and development.
- Wearables: Smartwatches, Bluetooth earphones and other wearables may see a decline in Q1 production due to labor and material shortages, and some new product releases may be delayed.
- Notebooks and LCD Monitors: Monitor set shipment is predicted to fall from previous predictions to 27.5 million. Notebook sets already see shortages or depleted stock of key components, which is projected to drastically decrease in predicted shipments from 35 million units to 30.7 million in Q1.
- Smartphones: First quarter smartphone production, which is highly labor-dependent, is expected to decline by 12 percent year-over-year to have the lowest output for a quarter in the past five years.
For more detailed information, see TrendForce’s press release that includes shipment forecasts and information on consumer electronics and other market segments.
Hope for the Best, Plan for the Worst
As of the end of February, coronavirus cases continued to increase around the world. Although it is not widespread in the U.S. at this time, it’s a good idea to review your ISV company’s business continuity plan to ensure, for example, that your employees have the tools they need to work at home if quarantines become necessary and you’ve taken other necessary measures to keep your business running.
Also, if you depend on partners to provide your customers with total IT solutions, keep the lines of communication with regard to shortages that could impact your revenue and budget accordingly.
Continue to monitor the impact the coronavirus is having on the world and the world economy, and position your business as well as you can in light of COVID-19’s effect on the tech industry.