The coronavirus outbreak has been disrupting everything including the NBA, Hollywood movie releases, and the biggest trade show events. Now it may be endangering new product launches for the tech industry.
The IPC, a trade association for the electronics manufacturing industry, conducted a survey last week to find out how the outbreak is impacting the supply chain. Of the 101 companies polled, 22 percent said they expect the coronavirus to result in fewer new product introductions this year.
The IPC’s chief economist, Shawn DuBravac, blamed the problem on component shortages and travel restrictions caused by the outbreak. “When you think about a design cycle for a product, it can be nine months,” he told PCMag. “It’s a pretty tight timeline, and to have disruptions to that can make it very difficult to complete the product’s engineering.”
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A Shock to the Supply Chain
The IPC released its survey on Friday after Apple reportedly canceled plans to hold an event later this month to announce a lower-cost iPhone. China, which has been ground zero for the coronavirus outbreak, is also home to much of the world’s electronics manufacturing. As a result, many factories responsible for making TVs, laptops, smartphones, and individual components have been slow to come back online.
The outbreak has resulted in disruptions across most of the electronics supply chain, IPC says. Companies on average are reporting a five-week delay on receiving component shipments from their suppliers. At the same time, about 50 percent of the survey respondents don’t expect business to return to normal until July.
The good news? The delays on component shipments won’t necessarily deprive consumers of graphics cards, laptops, and other PC parts. Rather, vendors will prioritize pumping out their best-selling models over less-successful product lines, DuBravac said. “You probably won’t see a single type of PC component out of stock across the board. Instead, you’ll see certain models or certain configurations might be out of stock or have been delayed,” he added.
The other factor that may offset component shortages is how demand for electronics in China and other markets hit by the coronavirus is falling. For instance, research firm IDC forecasts smartphone sales in China could plummet 40 percent year over year during this year’s first quarter. Nvidia has warned about declining demand for GPUs in China as well.
DuBravac also noted that disruptions in supply chains are actually quite common. Natural disasters such as earthquakes, volcanoes, and floods do happen from time to time, which can result in production and shipment delays. Freights can also get held up at customs. So companies are routinely navigating component shortages and factoring in potential logistic problems when trying to pump out new products.
“This supply shock (from the coronavirus outbreak) did not impact things in a systemic way,” he said. “A majority of the manufacturers have continued to be able to produce.”
However, the outbreak does appear to have thrown a wrench in new product launches. According to DuBravac, many vendors will regularly send their engineers to visit factories in China, Europe, and Mexico when designing new products. The goal with these visits is to prototype and refine the hardware during the manufacturing process so that the finalized product will be ready for the actual launch.
“Now all those trips have been canceled,” DuBravac said. “These companies will now have to adjust their plans to bring their products to market.”
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What Vendors Are Saying
How the coronavirus has impacted the major electronics vendors over the last two months has been pretty mixed. Companies including Apple, Facebook, and Nintendo have all warned consumers about potential product shortages hitting the iPhone, Oculus VR headset, and the Nintendo Switch console.
Others, such as chip maker AMD, have managed to largely dodge the impact. “Our supply chain is primarily focused on China, Malaysia, as well as Taiwan. And I would say it’s a very robust supply chain,” AMD CEO Lisa Su said last week. “And based on what we’re seeing today, we’re actually back to near normal supply capacity.”
TSMC, a major chip manufacturer for AMD and Nvidia, also told PCMag “At this time, we do not expect our commitments to customers to be affected,” despite the coronavirus outbreak.
Intel, on the other hand, has experienced “some modest” disruption to its operations in China, where it has design centers and a NAND manufacturing plant, the company’s CFO George Davis said last week. “So we’re starting to see customers being impacted by it, where their supply chains are being disrupted. And so they’re trying to figure out when do they want all their components to arrive,” he added.
One of those clients is Lenovo. The company told PCMag it’s “inevitably facing some short-term constraints and delays as the supply chain is ramped back up after the extended factory closures.” So to compensate, the PC vendor has been leveraging the rest of its manufacturing and distribution network to minimize the impact on customers.
Memory maker Seagate, meanwhile, said it’s still facing “uncertainty” with the company’s supply chain. Nevertheless, Seagate’s hard drive factories in China are up and running while the rest of the company’s manufacturing facilities in the rest of the world have been fully operational.
Others, like PC hardware provider NZXT, are still shipping customized desktops and PC cases to consumers. “However, the stock of certain products may be more limited than normal,” NZXT added.
In a positive sign for the market, manufacturing giant Foxconn, which makes Apple’s iPhone, says its factories in China will return to full operation at the end of this month. However, IDC analyst Linn Huang told PCMag Chinese factories are still facing the obstacle of quickly recruiting enough workers to man their assembly lines.
“Logistics recovery is ramping back up, but labor return remains slow. We don’t expect to see rush of labor until weather improves in May,” Huang added.