Report: Smartphones, Notebooks to Take Hit From Coronavirus Outbreak

February 27, 2020

Manufacturing, supply chain in China impacted by spread of COVID-19, TrendForce says

By Jeffrey Burt

The impact of the novel coronavirus outbreak continues to be felt in the tech industry, with conferences being canceled and companies being forced to revise their economic forecasts. In a recent report, TrendForce, an analyst firm that focuses on the supply chain, said products from smartphones to semiconductors will take a hit to various degrees, which will cause further ripples around the globe.

The Lowdown: Already, concerns about the spread of the COVID-19 virus have caused the shutdown of the popular Mobile World Congress (MWC) show this week in Spain, forced Apple to miss forecasts, and had companies like Microsoft and Nutanix cut revenue guidance. HP said it will probably take a financial hit in the quarter.

The Details: Among the key findings in the report released this month:

> Smartphones: Production in the first quarter is expected to fall 12% year over year, due in large part to the labor-intensive nature of smartphone manufacturing and shortages in parts of the supply chain. Product shipment during the quarter is forecast to fall 10.4%.

> Notebooks: Product shipments will decline 12.3% year to year for a market that’s seeing a shortage in such components as batteries and hinges. Production could fall from a predicted 35 million units to 30.7 million in the quarter.

> Memory: The DRAM and NAND flash industry could escape any impact from the coronavirus outbreak. Semiconductor fabs are highly automated and companies had stocked up on enough materials before the Chinese New Year to avoid short-term shortfalls.

> Internet of Things (IoT): The market should be unaffected in the short term. Some top-tier Chinese manufacturers like Huawei have restarted operations. In addition, each link in the IoT supply chain can be easily substituted, keeping open the flow of components. However, a long-term outbreak could impact the industry.

> 5G: China’s 5G efforts will take a hit. Most telecom bids for everything from 5G infrastructure construction to purchasing agreements have been postponed and many key component suppliers are based in or around Wuhan, where the outbreak started and hit hardest.

The report also looks at other industries, from automotive and semiconductors to lithium-ion batteries and wearable devices.

The Impact: Many sectors of the tech industry are preparing for a difficult first quarter that could spill over into the next three months. Some were forced to close down manufacturing facilities in China, dealt with restricted travel to and from the country, and are pulling out of trade shows. Not only was MWC canceled but major vendors like IBM, Verizon, and AT&T decided not to exhibit at the RSA Conference 2020 in San Francisco this week. Facebook also shut down a global marketing conference in the city.

Background: Cases of COVID-19 continue to show up across the globe. The latest numbers from the World Health Organization put the total number of cases at more than 82,000 spanning 48 countries, with deaths surpassing 2,800. The United States recorded its first case of unknown origin. In all, 60 coronavirus cases have been confirmed in the country.

The Buzz: “We produce most of our products in China,” HP President and CEO Enrique Lores told CNBC. “After Chinese New Year, production has slowed down. We are seeing a recovery, and the way we’re looking today is a temporary impact during Q2.”