Update: The Implications of the Coronavirus in the Electronics Supply Chain
The coronavirus (COVID-19) continues to weather the electronic supply chain.
China’s car sales fell 92% in the first half of February.
NXP CEO Richard Clemmer announced that they expected to see losses of between $50 million and $150 million.
COVID-19 has reached at least 140 countries.
The global electronics supply chain has faced harsh times over the last few years. The shortages of 2018 wont soon be forgotten, and the trade disputes of 2019 led many Asian companies to readjust their investments and shift their manufacturing focus to avoid tariffs. In an effort to circumvent tariffs, many Asian companies that export to the US decided to relocate to the Southeastern Asian countries. Vietnam received many of these companies, such as Kyocera, Nintendo, Goertek, Gopro, TCL, and many more. Casio Computer, Daikin Industries, Ricoh, and Delta Electronics are among the many companies that migrated to Thailand, and many others have gone to the Philippines. These relocations were expected to be very beneficial and to be the main driver of the region’s economy. While most of the electronics supply chain would have predicted 2020 to be a year of recovery, nobody predicted the arrival of the coronavirus, or COVID-19.
As of writing this, there are a total of 169,387 confirmed cases and 6,513 deaths, and the virus has been declared a pandemic. CLICK HERE for a live tracker and map of the virus’ spread.
Since it was first reported in Wuhan, China on December 31, 2019, COVID-19 has been weathering global supply chains. Asia, being the epicenter for manufacturing and a crucial region for every supply chain, is the last economy that anyone wants to slow down. The negative implications of the virus on supply chains can be seen most clearly in the automotive manufacturing sector and the electronics manufacturing sector.
As China has increasingly become a major automotive and auto parts manufacturer, their plant shutdowns have had a ripple effect across the global automotive manufacturing supply chain. Wuhan, the city where the outbreak began, is known as “motor city”, because it is home to auto plants including General Motors, Honda, Nissan, Peugeot Group and Renault. Wuhan alone accounts for roughly half of Honda’s total production. The nationwide shutdown of these factories resulted in China’s car sales falling 92% in the first half of February.
In the electronics manufacturing sector, major companies announced they would temporarily shutdown all corporate offices, manufacturing locations, and retail stores across China. While stocks are beginning to bounce back after tumbling over the past few weeks, many companies are still feeling the impact of the coronavirus. NXP Semiconductor, a Netherlands based manufacturer, has warned that it has lowered its 1Q20 revenue projections due to the spread of COVID-19. NXP CEO Richard Clemmer announced that they expected to see losses of between $50 million and $150 million. Since then, several other companies have made similar announcements.
Other companies projecting revenue losses include:
- Microchip Tech
- Analog Devices
Labor disruptions are now emerging worldwide, as the virus extends its reach to at least 140 countries. Many of which are very important countries to the electronics supply chain.
Current statistics show:
- China: 81,032 confirmed cases
- Italy: 24,747 confirmed cases
- Spain: 9,428 confirmed cases
- Germany: 6,672 confirmed cases
- France: 5,397 confirmed cases
The rapid spread of the virus has led countries to enforce travel bans, quarantines, and temporary company shutdowns. This in turn will further diminish availability and lengthen lead times. Aegis Components continues to diligently monitor the situation in an effort to strategically mitigate any related issues. If you are struggling to meet your requirements, we invite you to contact us!