Apple, Nintendo, Hitachi … How the coronavirus paralyzes the manufacturing of electronic products

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Coronavirus is not just a global health problem. Qualified as a global health emergency by the World Health Organization on January 30, 2020, the epidemic also has significant economic impacts, particularly in the consumer electronics sector: China is the central link in production networks. Consumer electronics, which are extremely dependent on these networks, are among the sectors most affected by these disruptions caused by numerous plant closings.

Factories close

To prevent the spread of the virus, factories are closing in turn, which is a major concern for the sector. "Since the main provinces most affected by the virus are Zhejiang, Guangdong and Henan, which are very important for the manufacturing of technologies, there is obviously a big problem"said Don Yew, analyst at Morningstar in Singapore, quoted by the Financial times.

Some are already advancing figures. According to Strategy Analytics, smartphone sales worldwide will drop by 2% in 2020 compared to previous forecasts and 5% in China due to the coronavirus. These estimates are to be compared to recent announcements made by certain electronics giants.

Quarantine for Foxconn workers

On February 6, 2020, Foxconn announced that its workers, regardless of their region of origin, would be placed in quarantine for a period ranging from 7 to 14 days upon their return from Lunar New Year holidays. China's largest private sector employer previously reported that one of its main production bases in China, in Zhengzhou (center), dubbed "iPhone City", would not resume operations until February 10, due to an extension of the Lunar New Year holidays.

Foxconn is the world's leading subcontractor for consumer electronics. Number of technology companies dependent on it for the manufacture of electronic objects. He notably assembles iPhones for Apple. The group is trying to reassure about the risk of a disruption in the supply chain, saying it has already been confronted in the past with the SARS epidemic in 2003. But Foxconn has already revised its forecast growth in sales in 2020, anticipating an increase of between 1% and 3% against a range of 3% to 5% previously expected.

Apple delays new iPhone release, Nintendo announces delays

The consequences are very concrete. For the first time in its history, Apple had to delay the marketing of its new iPhone. Apple brand smartphones are generally released in September, but it plans to launch an exceptional device more affordable in March. Tim Cook, the head of the American firm, has repeatedly said that alternative solutions should be found to compensate for the slowdown caused by the epidemic.

The consequences of the coronavirus do not stop there for the Cupertino company. It had to close its 42 stores on Chinese territory until February 9. According to a report from the Asian site Nikkei, Apple would have ordered 65 million iPhone 11 and 15 million for the youngest. But "suppliers believe coronavirus outbreak will affect production schedule".

Apple is not the only manufacturer affected. "The impact on our supply chain seems inevitable"said Mitsuaki Nishiyama, chief financial officer of Hitachi, interviewed by the Wall Street Journal. For its part, on February 6, 2020, Nintendo announced production delays on the Switch, a console assembled largely in China. The firm also announced that the "Animal Crossing: New Horizons" version will be delayed. Shuntaro Furukawa, president of Nintendo, apologized.

Game consoles, like smartphones, laptops or even virtual reality headsets, are mostly made in China or Taiwan. It is therefore likely that many other companies are affected. Facebook, for example, announced that the Oculus Quest would suffer from supply problems.

An "opportunity" for United States ?

This situation does not seem to displease everyone. Wilbur Ross, the United States Secretary of Commerce, caused outrage when he declared on January 30, 2020, that "companies will have to reconsider their supply chain because after SARS and now this virus, these epidemics are a risk factor to take into account"."I believe this will help accelerate the return to employment in North America, the United States and probably Mexico", he added. Then the minister took the example of Apple, which plans to relocate part of its Chinese production.

For its part, the Chinese Central Bank believes that the coronavirus remains a source of uncertainty for the world economy, and that its consequences are not confined to China. The financial institution also announced, on February 3, 2020, the injection of 156 billion euros into the Chinese economy while the Chinese stock markets plunge. Because the Tech sector is not the only one affected. Chemistry, automotive and textiles are also extremely disrupted by the epidemic. Toyota, for example, has suspended production at its assembly plants in China. Volkswagen made the same decision.

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