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Coronavirus Creating Supply Chain Chaos
The Wuhan coronavirus, or COVID-19, has killed more than 1,000 people and has infected more than 40,000 people globally. As fears continue to spread throughout China, the world’s largest smartphone market, smartphone production and worldwide shipments are predicted to drastically decrease due to mandatory factory closures and quarantines on workers.
Major tech companies including Apple, Samsung, Microsoft, Tesla, and Google shut down all corporate offices, manufacturing factories, and retail stores across China earlier this month. According to the South China Morning Post, Chinese brands Oppo, Xiaomi, Lenovo, and Huawei also expect to see production delays. Market research firm Canalys forecasts that smartphone shipments in China could drop by between 40% and 50% between the fourth quarter of 2019 and the first quarter of 2020 due to strains on the supply chain stemming from the coronavirus.
TF Securities analyst Ming-Chi Kuo predicts Apple could see a 10% reduction in shipments for the current quarter while Wedbush Securities analysts Dan Ives and Strecker Backe think between 3 million and 5 million iPhones are at risk of being pushed from the March quarter to the June quarter if supply chain issues persist. New AirPods Pro models will also be affected by production delays.
The world’s largest mobile technology conference, Mobile World Congress, has even been canceled due to the COVID-19 outbreak. The show’s organizer, GSM Association, was forced to cancel the conference as numerous companies including Ericsson, Sony, Cisco, Amazon, Facebook, and LG began announcing their decision to no longer attend due to safety concerns.
John Hoffman, CEO of GSMA Limited, stated, “With due regard to the safe and healthy environment in Barcelona and the host country today, the GSMA has cancelled MWC Barcelona 2020 because the global concern regarding the coronavirus outbreak, travel concern and other circumstances, make it impossible for the GSMA to hold the event.” The cancellation is estimated to cost the city of Barcelona about $500 million in economic activity.
While the race is on to find an effective vaccine or cure for the coronavirus, only time will tell when the global smartphone supply chain will be back to business as usual. In the meantime, Chinese consumers will likely take advantage of the App Store and Google Play as they look for entertainment in mobile applications to help them pass the time safely indoors.
With production of smartphones winding downward, the value of trade-ins may increase given the tighter supply chain. Most importantly, we hope this outbreak gets under control for the wellbeing of everyone impacted.