Tech Supply Chain Forecast To Suffer Coronavirus Setback

As the situation in China and Hong Kong progresses, it is becoming clearer that the tech industry will be among the hardest hit by disruption. The supply chains of tech companies like Apple, Dell Technologies and HP, to name but a few are set to take a severe hit as a result of the epidemic and its resulting quarantine. Though the mortality rate remains low and the number of recovered cases is rising – currently at around 4000 discharged globally – the impact of the quarantine has prevented Foxconn from re-opening its Shenzhen factory.

Foxconn, a major supplier of electronic components vital for devices such as Apple’s iPhone, was disallowed from opening its Shenzhen factory today, forcibly extending the Lunar New Year break. Foxconn did receive permission to reopen its Zhengzhou factory, however only 10% of the workforce arrived, severely limiting production capacity and possibly delaying the latest release of the iPhone. Steve Banker, in his contributing article to Forbes published yesterday, states ‘Apple is highly likely to suffer material impact to its financial results’ as a consequence of this disruption.

In same article, Mr Razat Gaurav, CEO at Llamasoft, gave some insight into the kind of preparations companies can take to minimise the impact of such disruption. Quoted in Forbes he stated: “This is a wake-up call for companies thinking about designing a supply chain. Risk and resiliency need to be part of the design”. Mr Gaurav also reflected on where contingencies could go wrong: ‘Many companies have business continuity plans… but the alternative facilities were also in China’. With a region-wide disaster like the Wuhan Coronavirus, these contingencies fail to be effective.

Elsewhere, reported in The Register, global server shipments are set to damage sales by as much as 10%. Drawing on data from Digitimes Research, the shipment growth for the industry – initially forecast as a 1.2% growth – is set to reverse and actually shrink by 9.8%. Demand for the server industry remains strong, though the supply chain is set to suffer if disruption continues. In response, companies like “Lenovo, Inspur and Supermicro are planning to raise the proportions of their in-house server productions”.

The Wuhan Coronavirus continues to prove a severe setback for the tech industry, just as it is gearing up to start the year. However, its lessons should prove valuable, if companies can adapt to situations such as these and build in resilience to their supply chain strategies. Being flexible with sourcing materials and removing single points of failure will help adaptable companies to thrive and overcome the hefty disruption.

We are continuing to follow the impact of the Coronavirus on the supply chain, please check back with us for regular updates.

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Please see below for the sources used in this article:

https://www.theregister.co.uk/2020/02/11/coronavirus_server_sales/

https://www.digitimes.com/news/a20200210PD209.html

https://www.forbes.com/sites/stevebanker/2020/02/10/global-high-tech-supply-chains-disrupted-by-the-coronavirus/#1138dd1f3eae