The coronavirus outbreak, which has hampered global tech giants’ 2020 plans leading to cancellation or postponement of global flagship conferences, is set to hit supplies of smartphone components from China to India at least till the second quarter of this year.
While smartphone manufacturing has picked up in India over the past few years, the country is still dependent on China to a large extent for supplies of components.
According to Tarun Pathak, associate director, Counterpoint Research, India’s smartphone market will see at least 15 per cent shortfall in shipments in the first quarter (January-March period).
“Whatsoever shipments were to arrive in India have come by February end but the problem will get bigger this month as Chinese manufacturing plants were almost shut last month. We are keeping a close vigil and are updating the industry situation very week,” Pathak told IANS.
“There will be impact to new devices to be launched in the first half which have facilities in China, as factories will not function properly. Components sourced from China will also be impacted as all factories will resume operation slowly and cautiously,” according to Peter Richardson, Research Director, Counterpoint Research.
Smartphone sales in China may also see a 30 per cent drop during the lockdown period which is likely to last through the end of March.
“The negative impact from the supply chain side will last until the end of Q2 minimum,” said Richardson.
The tech industry saw this coming albeit slowly.
With new coronavirus or COVID-19 now spreading its tentacles across the world – 57 countries affected so far – tech giants have scrambled to cancel or postponed their flagship conferences one by one as large gatherings have been put on hold in some countries with several cities declaring state of emergencies.
The bigger worry, however, is the disruption of the global supply-chain that is set to impact the manufacturing – from smartphones to consumer electronics – by the middle of this month if the coronavirus cases keep swelling in numbers.
The worst is yet to come.
According to Harvard Business Review (HBR), the peak of the impact of Covid-19 on global supply chains will occur in mid-March, forcing thousands of companies to throttle down or temporarily shut assembly and manufacturing plants in the US and Europe.
“The most vulnerable companies are those which rely heavily or solely on factories in China for parts and materials. The activity of Chinese manufacturing plants has fallen in the past month and is expected to remain depressed for months,” said HBR in its report on Friday.
The SARS epidemic started in the Guangdong province in 2002 and led to 8,000 cases in 2003. During that year, the GDP of China represented 4.31 per cent of the world GDP.
By contrast, the number of detected cases of Covid-19 has already passed 80,000 with close to 3,000 deaths – and China represents about 16 per cent of the world GDP – an almost four-fold increase, said the report.
Supply lead times will also have an impact.
“Shipping by sea to either the US or Europe takes, on average, 30 days. This implies that if Chinese plants stopped manufacturing prior to the beginning of the Chinese holiday on January 25, the last of their shipments will be arriving the last week of February.
“All this suggests that there will be a spike in the temporary closures of assembly and manufacturing facilities in mid-March,” said Pierre Haren and David Simchi-Levi in the report