The latest coronavirus outbreak (December 2019) has claimed many lives, especially in Wuhan (China), the epicentre of the outbreak. More than 1,000 people have lost their lives in Wuhan and many more thousands are suffering and struggling to get care. The extreme medical situation led to Wuhan being quarantined. Though nothing trumps the human suffering in this scenario, the coronavirus (officially known as Covid-19) crisis is showing a ripple effect across various parameters, the least of which is the international business.
“The coronavirus, a human tragedy, is disrupting economic activity in China as production has been halted and mobility around affected regions limited. Spillovers to other countries are likely…” – IMF (International Monetary Fund)
The International Monetary Fund (IMF) has expressed concern over the effect of coronavirus on commodity prices worldwide. It stressed the importance of global collaboration to “contain the economic damage and strengthen our capacities to react to future epidemics wherever.”
Effects on the cell phone and laptop industry
In our global economy, nothing happens in isolation. What happens in one part of the world, affects the rest of the world too. From major giants such as Apple to even small retailers and service providers, every player in the cell phone and computer business around the world depends on supplies from China – directly or indirectly. And just like every international business, the technology industry is also suffering because of the disruption caused by coronavirus.
With Wuhan under quarantine, millions of people are stuck inside their homes, unable to work or shop or participate in any economic activity. In addition, trade and travel restrictions have been imposed to try and contain the spread of the virus. Due to all this, the production and supply of goods from China have been severely hit. Companies, offices, and factories have been shut down, which is, in turn, impacting businesses and the economy worldwide.
The manufacturing industry in China has been severely hit. The country is the biggest manufacturer and supplier of phones, computers, and their parts. With work halted across multiple factories and the extended quarantine in Wuhan, the supply chain has suffered significant breaks and delays that is causing a shortage of products and spare parts worldwide. While some factories such as Huawei have resumed work after a temporary shutdown, many factories still remain inactive. Major tech companies, such as Apple and Google, had temporarily shut down their stores and factories in China but no date for reopening has yet been decided.
Zhengzhou factory, also popularly called “iPhone city”, is situated just about 300 miles (500 km) from the epicentre Wuhan. Foxconn is the biggest assembler and manufacturer for Apple. Its plant in Zhengzhou is still awaiting clearance before work can begin again.
The scarcity may also threaten the launch of iPhone’s new cheaper variation, often called SE 2, which is expected to hit the markets in the first quarter of 2020. However, no push back on the launch date has been announced yet.
TF International Securities, a financial services group in the Asia-Pacific region, forecasted a 10% decrease in iPhone shipments due to coronavirus.
The case of 2020 Mobile World Congress (MWC), an annual trade show by GSMA primarily for the mobile industry, is another example of damaging effects of coronavirus on the tech sector. First inaugurated in 1987, this is an important event for the industry where almost all major players take part and showcase their upcoming products and technology. However, this year multiple major companies withdrew from the event due to coronavirus scare, which ultimately led to the cancellation of the event.
Along with the delayed and missed launch of new products, this unexpected interruption in the supply chain is expected to lead to an increase in the prices of parts, and hence repair costs, as well. From wires and chargers to screens and panels, a huge share of all kinds of spare parts is also manufactured in China. IHS, a leading supplier of LCD panels for TVs, notebook PCs and PC monitors, estimates that an open-cell LCD-TV panel, which was earlier speculated to rise in price by $1 or $2 per month, might end up being $3 to $5 more expensive instead.
Experts say that even if the situation is brought under control soon, it would take until at least March for the supply rate to return to normal. However, with no immediate cure to coronavirus insight, it is possible that the restrictions would continue for longer. The longer the manufacturing process is unsettled, the longer it would take to restore the trade cycle.