As medical researchers and scientists scramble to develop a vaccine for the novel coronavirus (now officially known as the COVID-19), wholesale distributors are turning their attention to the potential impacts of the disease on their global supply chains.
At press time, the disease had killed more than 1,500 people and infected over 71,000 people worldwide, with the vast majority of cases being in mainland China. As the country takes measures to keep COVID-19 from continuing its deadly spread, at least some of those moves involve companies that make goods for American companies.
Although people are returning to work after cities and business sectors were shut down for more than two weeks, much of Hubei province, the epicenter of the outbreak, remains under lockdown. The lockdown and other strategies meant to curb the coronavirus’ spread could have major implications on supply chains. As the largest exporter of the world’s production, China sent 18% of its exports to the U.S. in 2019.
Electronics Taking a Hit
Distributors that operate in and around the electronics sector could be among the first to feel the impacts of the outbreak. Apple supplier Foxconn has been approved to resume production in Zhengzhou — a key manufacturing plant in China — but so far only 10% of the workforce has returned (16,000 people), according to CNBC. Apple announced it will miss its revenue forecast due to weak demand in China stemming from the virus.
China makes half of the world’s LCD panels for TVs, laptops and computer monitors. There are five LCD factories located in the city of Wuhan, a provincial capital and commercial hub that is at the center of the coronavirus epidemic, Quartz reports.
In an EE Times interview, Astute Electronics’ Aran Coker said that it’s too early to be specific about the impact of COVID-19 on the supply chain. And while a surplus has minimized any potential impact on the supply side, Coker said there’s been relatively little impact in terms of supply to its customers. “However, there is likely to be an impact on the supply side, and bare PCB production and metal prices have been impacted,” the publication added.
3M Prioritizes Hospitals
Certain products directly related to coronavirus prevention are already in short supply. Medical masks — some of which would normally be routed to hospitals and medical facilities around the world — are in particularly high demand in China right now. This is forcing manufacturers to boost output globally and hospitals to ration supplies.
Honeywell and 3M are among companies that have announced plans to increase mask production. “In China and elsewhere, 3M is working with customers, distributors, governments and medical officials to help get supplies where they are most needed. 3M is also closely monitoring and responding to any potential impact to our broader supply chain. We notified 3M authorized distributors that we are prioritizing orders to help serve our base business – including hospitals – due to high global demand,” the company said in a release.
Companies Brace for the Impact
The U.S. imports 21% of all its goods from China, according to PYMNTS.com. If there is any interruption in supply from a lack of manpower or due to coronavirus contagion concerns, some companies could feel a bigger impact than others.
Companies appear to be bracing for the worst. The American Chamber of Commerce in Shanghai conducted a survey about coronavirus and its impact on companies, 87% of which believe the coronavirus will have a direct impact on 2020 revenues (24% expect revenues to fall by 16% or more). The Chamber says that 16% of respondents expect China’s 2020 GDP to fall by more than 2% as a result of the coronavirus.