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Tech Industry Feeling the Heat of Coronavirus

The tech sector is currently feeling the pinch of the Coronavirus. In the last few weeks, major technology companies have not only closed offices, stores, and factories in China but are also restricting employees from travels to the country, unless absolute necessary. The closures, which were initially expected to last through the Lunar New Year holiday week in late January, were soon extended to mid-February and now officials in some provinces and districts are telling companies not to resume work until March 1, 2020, according to various reports.

Big technology companies including Apple, Samsung, Microsoft, Tesla, and Google closed their offices already in Wuhan, where the virus is supposed to have originated and other parts of China and many of them did not specify when exactly the offices would reopen.

Apple’s supply chain is feeling the strain as the Coronavirus extends production outages and dampens demand for the company’s products in China. Tim Cook, the chief executive of Apple, told analysts in January that the company’s suppliers could be disrupted in the coming days.

China is an important market and manufacturing region for Apple. It’s a key growth driver for the company, which shipped 3.2 million iPhones there through December, according to data published by the China Academy of Information and Communications Technology, a government think tank. Analysts have cut iPhone shipment forecasts by 10% for the first quarter of 2020 due to the coronavirus.

Apple’s head of people, Deirdre O’Brien, wrote in an internal email that offices and retail stores re-openings are being determined. “Additional cleaning, health protocols and local restrictions around public spaces will factor into this decision,” she was quoted in Bloomberg.

Hon Hai Precision Industry or Foxconn the largest iPhone maker, told employees at its Shenzhen facility not to return to work when the extended Lunar New Year breaks ends Monday, according to a report. Also, Inventec, one of the few makers of AirPods, planned to open a new facility as early as June, but the Coronavirus has slowed that effort, according to a person familiar with the matter.

While Facebook does not have offices in China, it also warned employees against business travel to the country, followed by other companies like LG and Razer. Even otherwise, reportedly more than 50 airlines worldwide have now suspended flights in and out of the country.

Read more: Will Coronavirus Impact Your Next Tech Purchase?

Facebook has also stopped taking new orders for its latest Oculus Quest VR headset, citing the outbreak for the delay. “[Like] other companies we’re expecting some additional impact to our hardware production due to the Coronavirus. We’re taking precautions to ensure the safety of our employees, manufacturing partners and customers, and are monitoring the situation closely. We are working to restore availability as soon as possible,” the company said in a statement to Android Central.

Amazon has not yet announced office closures in Beijing, Shenzhen, Shanghai, and Guangzhou (the company does not have an office in Wuhan), but is requiring employees to get approval for any essential travels to China. Employees who are traveling in and out of China are also advised to work from home for a period of 14 days before returning to the office.

Google has temporarily halted business travel to mainland China and closed its stores. Google is temporarily shutting down all of its China offices due to the Coronavirus outbreak, the company confirmed to The Verge. The shutdown includes all offices in mainland China, as well as Google’s offices in Hong Kong and Taiwan.

A Google spokesperson says the company now plans to keep its offices closed in accordance with the government guidance, and it’s also placed temporary business travel restrictions on flying to mainland China and Hong Kong. The company is also advising employees currently in China, and employees who have immediate family members returning from the country, return home as soon as possible and to work from home for at least 14 days from their departure date.

“Based on the evaluation of risk communicated by global health authorities we have advised employees in China to work from home and cancel all non-essential business travel, ,” a Microsoft spokesperson told Forbes.

Due to factory closures, Tesla is also citing the Coronavirus for postponed Model 3 deliveries, though the company said it only anticipates a “one to one-and-a-half week” delay. It planned to resume production at its Shanghai factory this week.

Among tech companies in China, Hong Kong-listed Tencent has asked its employees to continue working from home for another week, extending the return date to from Feb. 14 to Feb. 21. Qualcomm’s chip-making business is also expected to be in doldrums. Last year, nearly half its revenue came from China.

Other Chinese brands that expect to see production delays include Oppo, Xiaomi, Lenovo, and Huawei, according to the South China Morning Post.

“Companies which rely on components from Hubei will be the most impacted, such as Lenovo,” Nicole Peng, mobile analyst at Canalys, said. “For companies like Huawei, whose operations are in Guangdong, the situation is less severe, although no company right now will be able to resume factory operations at 100 percent capacity.”

As Chinese smartphone brands are dominating a chunk of the global smartphone shipment, TrendForce’s latest investigation finds that Delayed work resumption and uncertainties in employees’ returns will cause the monthly delivery of key components to be postponed, thus affecting the progress of smartphone production. The analyst is lowering its 1Q20 smartphone production forecast to a 12% decrease YoY, at 275 million units produced, which is a five-year low.

GSMA has officially canceled its upcoming Mobile World Congress (MWC) 2020 trade show – thanks to the Coronavirus outbreak. For the first time in Barcelona’s 33-year history that organizers have called off the flagship event that was scheduled to take place in Barcelona between February 24th and the 27th. Over the past few days numerous important companies decided not to appear at the show, which significantly reduced its appeal to attendees.

LG was the first vendor to pull out of MWC earlier this month, and ZTE canceled a planned press event over Coronavirus fears. Ericsson, one of the largest exhibitors at MWC, also withdrew from the show. It was then followed by Nvidia, Intel, Vivo, Sony, Amazon, and NTT Docomo – as all these vendors canceled their participation. Cisco, Nokia, BT, and HMD also pulled out of the event citing potential risks for further outbreaks of the disease.

The cancellation of the show will inevitably cause huge losses for the organizer, GSMA as well as for companies who now have to cancel reservation of their venues and flight tickets. Also the sudden and unexpected change will inevitably affect their sales at least in the first half of the year. And this is a tricky situation as Ben Wood, chief of research at consultants CCS Insight told Reuters, “Now they face the challenge of having to figure out what is the best way to salvage something.”

As per report, until now, the Coronavirus death toll has risen to to over 1000 while more than 41,000 people have been infected worldwide. As the situation appears to worsen, it’s unclear what the coming days will look like and how long it will take for the country to recover from the impact of these closures.

(The article has been updated on Feb 14th with news of GSMA canceling its upcoming Mobile World Congress 2020)

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Sohini Bagchi
Sohini Bagchi is Editor at CXOToday, a published author and a storyteller. She can be reached at sohini.bagchi@trivone.com