Corona Virus : Impact on Tech Companies

The spread of the deadly coronavirus has shaken up the technology industry. From iPhones to LCD TVs, much of consumer technology is made in China or relies on Chinese-made components. The United States is the world’s largest producer of mobile phones, computers and televisions. It exports billions of dollars worth of goods every year.

When shops and factories are closed across the country, the coronavirus has a clear and direct effect on productivity. Depending on how quickly the virus continues to spread, analysts say global supply chains could be severely affected, causing delays and shortages.

Since 2013, China has become the largest smartphone market in the world, creating companies like Xiaomi, Oppo, Vivo and Huawei. Gerrit Schneemann, an analyst at IHS Markit, wrote in an email that even if the threat of the Corona virus subsides quickly, it will take weeks for Chinese phone makers to get their supply chains and logistics back in order. Domestic smartphone sales may fall sharply this month and are unlikely to recover by March. But this only helped to contain the epidemic for the next few weeks.

Snowman wrote: However, the possibility of such a situation cannot be excluded for more than one month. In the long term, it will take longer for the supply chain to recover, which will affect not only China and the Asia-Pacific region, but also global supply.

A Huawei spokesman said that while the company is monitoring the situation, the impact on the supply chain is limited. Earlier this month, the company resumed production of consumer goods and transportation equipment after a temporary halt. The company’s employees in Hubei Province work from home. Doctors in Hubei Province have made hundreds of diagnoses of the coronavirus. The company also announced that its annual developer conference, scheduled for February 11 in Shenzhen, has been postponed.

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In recent years, other companies, such as Samsung, Google and Sony, have gradually moved their smartphone factories from China to countries with lower production costs, such as Vietnam or India. However, these companies still rely on China for the supply of many of the components used in their smartphones, such as sensors or glass displays.

Apple’s supply chain remains closely tied to China. According to Reuters, only about 10% of Foxconn’s factories in Zhengzhou and Shenzhen (where Apple’s iPhones are assembled) were back in operation on Monday. These factories make up the lion’s share of the global iPhone production line, and further delays could impact global shipments.

Apple closed all of its retail, corporate and contract offices in mainland China the Feb. 1 for a very thorough investigation. Apple’s store openings in China are scheduled for the 9th. February will reopen, but it now looks like this reopening will be indefinite. Apple is expected to release the iPhone SE2 in March at a lower price. But sellers said that can also be delayed.

China also produces about half of the LCD screens used in TVs, laptops and computer monitors. Five LCD factories are located in Wuhan, the capital and commercial center of the coronavirus outbreak. Factory operations were suspended after Chinese authorities shut down the entire city last month. David Hsieh, an analyst at IHS Markit, said in an email that capacity at these plants could be halved by February. This could force Chinese manufacturers to raise prices in response to shortages.

According to UploadVR, Facebook reported last week that the coronavirus would affect production of the Oculus Quest headset. The company recently stopped taking new orders for standalone VR headsets.

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For fear of contracting the virus, several companies have decided not to attend this year’s Mobile World Congress (MWC) in Barcelona. MWC is rightly considered the most talked about mobile event of the year. Companies like Intel, Sony, ZTE, LG and NVIDIA have cancelled their appearances. Others have made their plans for the meeting, which will take place on the 22nd. February starts, reduced. Chinese multinational TCL has cancelled its upcoming press conference at MWC, but will be present at the show and announce new hardware. Samsung’s participation in global technology events will also be limited, as many of its Korean and US employees will stay home.

Huawei still plans to participate, but will require its employees to live in isolation in China for a certain period of time. The organizers of the meeting announced on 9. February announced it was banning all travelers from China’s Hubei province and requiring all other visitors to prove they had not left China for at least 14 days, the latency period for the disease. WAC participants can expect regular temperature checks and a non-handshake policy.

Source: https://www.cgdev.org/

Financial impact of various technology companies

  • Apple Inc. (AAPL), -2.44% Shares fell short of financial expectations for the second quarter as production in China slowed or stalled due to the KOVID-19 outbreak. The company said in a statement Monday: Work is resuming across the country, but we are slower than usual. Apple Corp. derives about 15 percent of its revenue from China, and many of its products are made in China.
  • Microsoft Corporation (MSFT), -4.21%, warned that the company would miss its guidance for the third quarter due to COVID-19. Microsoft announced in late January that it expected revenue for its More personal computing division in the third quarter to be between $10.75 billion and $11.15 billion, with the figures slid outside the normal range to reflect uncertainty about the health situation in China. Despite strong demand for Windows meeting the company’s expectations, the supply chain is normalizing more slowly than expected. Microsoft said all other parts of its third-quarter guidance remain unchanged.
  • Best Buy Inc. is -9.65%, which sources many consumer electronics from China. The company said it believed the effects of the coronavirus would be felt most in the first half of this year. Therefore, we believe that this is a relatively short-term disruption that will not affect our long-term strategy and plans. Our target is the first quarter, CFO Matt Bilunas said in a statement. And the full year outlook reflects our current best estimate of the impact.
  • Mastercard Inc -4.18% due to growth in cross-border travel and, to a lesser extent, cross-border e-commerce COVID-19.
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Conclusion:

One technology sector that has not tried to curb the epidemic is online entertainment. When millions of Chinese leave work and go home for a few days, many turn to video games, movies and social media for entertainment. Balloon Weekly reported that game time and purchases in China have risen sharply since January. But if the virus continues to spread and threaten one of the world’s largest economies, the benefits may be short-lived.

Useful resources :

https://www.who.int/emergencies/diseases/novel-coronavirus-2019

https://www.cdc.gov/coronavirus/2019-ncov/prepare/prevention.html

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