The spread of the coronavirus in China has everyone focused on the public health of China and of the entire world. While the attention is mostly fixed on health concerns, some of us are beginning to feel the implications of the coronavirus in the supply chain.
As of writing this, there have been 24,630 confirmed cases of the coronavirus and 494 related deaths, and these numbers seem to be steadily growing. Click here for an interactive map of the virus and updated statistics. As quarantines and restrictions multiply, many companies that rely on China are beginning to hurt.
As Chinese officials are scrambling to contain the outbreak, factories were originally ordered to remain closed until February 3rd. That date was then extended to February 10th and is still dependent on approval from central and provincial governments. Companies like Foxconn, a Taiwanese contract manufacturing company, have ceased nearly all of its production in response to the coronavirus outbreak. This stoppage wages a significant disruption to their business, but also Foxconn clients. Companies like Apple, that outsource production to Foxconn, are seeing this delay reflected in their company revenue projections for the upcoming quarter. Nearly all of the world’s iPhones are produced at Foxconn’s “iPhone City” in Zhengzhou, or by Pegatron, another Taiwanese contract manufacturer. Don Yew, an analyst at Morningstar in Singapore said, “Since the top provinces in terms of infections include Zhejiang, Guangdong and Henan, which are so important for tech manufacturing, there is obviously a big problem”.
Some companies have found themselves significantly more vulnerable than others during this time of crisis. Semiconductor and liquid crystal display (LCD) panel fabrication plants try to keep production continuous due to the costs involved in halting production equipment. BOE Technology, is the world’s largest producer of LCD panels accounting for 17% of the global supply. BOE’s recently constructed $7 billion dollar production facility in Wuhan began ramping up its production at the beginning of this year. Since then, they have begun to experience the very real impacts of the coronavirus outbreak, facing shortages of both labor and key components. IHS Markit service estimated that 55% of all LCD panels in the world will ship from China in 2020. China, being the epicenter for technology, affects the entire world when their production fluctuates.
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