Will the Wuhan coronavirus affect the production of devices from Huawei, Apple or Lenovo? Could it lead to an increase in the prices of smartphones or computers? To what extent will the outbreak escalation have consequences for the technology sector? These are some of the questions that this health alert leaves as it expands in China, where it has already affected more than 20,000 people. While some companies have asked their employees in the Asian country to work from home, others have been forced to close some of their factories. GlobalData warns that a prolonged outbreak can dramatically affect manufacturing obligations. Especially considering that three out of four mobiles are manufactured in China and around 30% of smartphones Globally they are sold in their market, according to a report by GSMA Intelligence.
“The impact will depend on how long the situation continues. In general, it is usual to work with a sufficient stock to satisfy demand, but if the situation lengthens it may affect the supply of components of all kinds, “explains Fernando Suárez, president of the General Council of Professional Colleges of Computer Engineering ( CCII) of Spain. If this happens, he points out that both companies and users could be harmed: “The most immediate and visible effect could be the increase in costs due to the shortage of supply.”
The WHO declared an international emergency for the coronavirus last week. Everything indicates that it is spread between people who are close by contact and small drops of saliva that the virus carrier excretes when coughing. To avoid this, the Asian country tries to minimize human contact. It has ordered the closure of entire cities and, in turn, of production centers, according to financial news portal Zero Hedge. For example, that of Suzhou, a city of 10 million inhabitants west of Shanghai with factories from Foxconn, Johnson & Johnson or Samsung Electronics. According to the same media, workers have been told not to go to these facilities for at least a week.
Ambrosio Rodríguez, dean of the Official College of Computer Engineers of Castilla la Mancha and collaborator of the CCII, highlights that the closure of entire cities and factories prevents workers from going to their jobs and, therefore, manufacturing their products. Although he maintains that a rise in prices could result from a possible shortage of products in the market, he acknowledges that it is difficult to predict the consequences of the outbreak.
“Companies within the technological sphere are used to foreseeing situations of natural catastrophe, such as earthquakes or floods, and others caused by non-natural causes, such as cybercrime. International standards have been defined for this. But in very few cases situations similar to this have been foreseen in which there could be a lack of personnel for a period of weeks or even months, ”he says.
Preventive measures and telework
The temporary closure of factories is added to that of multiple offices and stores in the Asian country by companies such as Apple. Manufacturers such as Huawei, Oppo and Lenovo claim to closely follow the evolution of the virus and take the necessary measures to guarantee the safety of their employees, both in China and in the rest of the world.
For example, Huawei Spain has reinforced the disinfection, sterilization and ventilation of offices and all its common areas and has made facial masks and special cleaning products available to employees. In addition, the company has contacted employees who have traveled to China to work from home for a period of 14 days and see a doctor if they have any symptoms.
This last measure has also been taken by other technology giants such as Facebook. Mark Zuckerberg’s company has restricted “nonessential” travel to China and has asked employees who have once traveled to the Asian country to work from home, according to Reuters.
Oppo stresses that, despite the coronavirus, its strategies and product plans “continue to run smoothly. Like Huawei, it has implemented a protocol to follow the necessary hygiene and health guidelines. Meanwhile, companies like Alibaba, Tencent or Baidu have opted for telecommuting their employees temporarily to prevent the spread of the coronavirus, according to the Asian portal Nikkei Asian Review.
Lenovo, meanwhile, has advised its employees to minimize all unnecessary travel. He has also advised them to communicate by phone or video conference rather than in person and to take “reasonable precautions when necessary, such as working from home.” Company sources say that “it is too early to speculate on how long the situation will continue.” “As a global company with multiple manufacturing sites around the world, we are well positioned to minimize any potential impact,” they say.
The coronavirus outbreak threatens to leave, at least in the short term, profound effects on China’s economy. GDP growth in the first quarter of this year could slow by one percentage point and stand at 5% or even less, according to economist Zhang Ming of the Chinese Academy of Social Sciences – the leading think tank state government— in statements collected by the magazine Caijing. The impact will also be felt in the technology sector. Data analysis company GlobalData estimated 8% growth in the Chinese ICT business market in 2020 before the outbreak. But he anticipates that the coronavirus will likely reduce this growth by about 2%.
Some companies intend to return to normal as soon as possible to avoid problems in production and in their economy. For example, Apple’s top suppliers in China plan to resume large-scale production on February 10, according to Bloomberg. Companies looking to get back to business next week include Quanta Computer Inc., Inventec Corp., LG Display Co., and Foxconn, which is one of the world’s leading technology manufacturers.
The escalation of the outbreak, according to Suárez, will affect some companies more than others: “A development or service company is not the same, where teleworking is a real possibility and does not have to affect production, than a physical product company, such as components or infrastructure. ” Therefore, those who would suffer the most would be those who “manufacture and assemble components” such as mobile phones or computers.
Although the crisis could have repercussions in other sectors. “Today, technology is present in many areas that could be affected, such as vehicles. A chain effect that could even affect unsuspected sectors ”. Many devices around the world use components of Chinese origin, so companies around the planet could be affected. Suarez makes an analogy with the field of health: “If China sneezes, the world catches a cold.”