Recent outbreak of the coronavirus (COVID-19) has raised alarms about the human toll of the epidemic as well as the short-term and long-term effects on the global economy, including the electronics manufacturing industry.
At the time of this publication, the coronavirus has spread to 181,310 people worldwide and killed 7,128 of those individuals. What started in Wuhan, China on December 31, 2019 has quickly become a global emergency, now considered a pandemic.
Workplaces have been shut down; workers have been told to stay home; and shipping has been disrupted. Travel bans have been instituted, and many people have been quarantined or have chosen to self-quarantine to prevent the spread of the coronavirus.
Where does that leave electronics manufacturers?
Coronavirus & the IPC
IPC (Institute of Printed Circuits) surveyed its members on issues surrounding coronavirus, and here’s what they said:
- 84% of electronics manufacturers and suppliers are concerned about the impacts COVID-19 will have on their business operations.
- 65% of electronics manufacturers have been informed by their suppliers that there will be delays in shipments (three weeks or more) due to COVID-19.
- While no electronics manufacturers have reported that they’re being quoted delays of more than six weeks, a majority of them expect shipment delays related to COVID-19 to be longer than six weeks.
How Coronavirus Is Affecting Electronics Manufacturers
Electronics manufacturers and suppliers are growing increasingly concerned about the impacts of COVID-19 on their businesses.
Shipping delays from any country affected by COVID-19 can cause many negative impacts for manufacturers, especially shipping from China, which is a known major supplier to the global industry.
Many U.S.- and European-based manufacturers count on inputs from China to produce finished goods in their factories. Delays in these cause delays in production of finished goods. Additionally, delays result in lower capital utilization rates since factory downtime increases while waiting for supplies. This translates into higher costs and poor financial performance.
Some companies will seek alternative sources; however, this will demand the investment of significant time by manufacturers. This will also mean higher costs because alternative sourcing is typically more expensive.
Delays in production from China could also produce delays in design and prototyping, which could hurt the introduction of new products over the next year. Delayed sales are incredibly difficult to come back from, even after supply delays and other constraints are lifted. That leaves many electronics manufacturers wondering what the future holds for their products.
Many businesses have indicated that they’re seeing the impacts from COVID-19, and the full impacts have yet to be felt. Apple recently announced it won’t meet previously projected sales goals for the current quarter. Similarly, Hyundai and Nissan have halted production outside of China due to parts delays.
What Electronics Manufacturers Are Doing
With so much changing on a day-to-day basis, businesses are responding the best they can to COVID-19-related supply disruptions. What are they doing to combat impacts from COVID-19?
Most are trying to access stock, including stock from non-traditional “grey” markets. They’re also seeking alternative sourcing, looking to other locations to continue production. While China has seen improvement in coronavirus cases, the virus has spread rapidly across the globe, and finding a safe place to continue production may prove difficult for many businesses. Some electronics manufacturers and suppliers are offering alternative materials and inputs.
For businesses, there isn’t much to be done besides monitor new developments and stay in contact with their suppliers. Most companies have inventory that can weather supply delays of up to two or three months. Delays that last longer than that will likely trigger delays in manufacturing operations, leading to devastating effects on a business’s production and the business itself.
How You Can Move Forward
The coronavirus pandemic is a global emergency. Its impacts on business operations and global supply chains is causing concern in the industry. The impacts of COVID-19 on electronics manufacturers are just beginning, and the way businesses respond to this challenge will determine if they fail or succeed.