The outbreak shows that what impacts China impacts everything
The tech sector is currently feeling the impact of the coronavirus, with companies closing offices, stores, and factories in China as well as restricting employees from nonessential travels to the country. The closures, which were initially expected to last through the Lunar New Year holiday week in late January, were soon extended to February 10th. Officials in some provinces and districts are now telling companies not to reopen until March 1st.
Multitudes of short- and long-term effects are anticipated, from postponed events to companies potentially missing a holiday launch target due to the nationwide office closures. Here’s a look at how the coronavirus has already affected the industry.
Earlier this month, major tech companies announced they would temporarily shut down all corporate offices, manufacturing factories, and retail stores across China. These companies include Apple, Samsung, Microsoft, Tesla, and Google. (Google has also closed offices in nearby Hong Kong and Taiwan.) Most of the closures were expected to last until Sunday, February 9th, though some companies did not specify when exactly the offices would reopen.
Apple’s head of people, Deirdre O’Brien, wrote in an internal email on February 7th that offices and contact centers were expected to open the week of February 10th, while retail stores’ reopenings were still being determined. “Additional cleaning, health protocols and local restrictions around public spaces will factor into this decision,” she wrote. At the time, it was thought that could have been as late as February 15th for many stores, according to Bloomberg. We’re past that date, and Apple is still being cautious about store reopenings; in a rare investor update published on February 17th, Apple said it is “gradually reopening our retail stores and will continue to do so as steadily and safely as we can.” The company did say that its corporate offices and contact centers in China are open.
Amazon has not yet announced office closures in Beijing, Shenzhen, Shanghai, or Guangzhou (it does not have an office in Wuhan where the virus originated), but it 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.
While Facebook does not have offices in China, it also warned employees against nonessential travels to the country. LG and Razer have also advised similarly. Whether travelers can even get to China is a whole other issue, as more than 50 airlines worldwide have now suspended flights in and out of the country.
PRODUCTION SHORTAGES AND LAUNCH DELAYS
As many products are manufactured in China (or use parts from Chinese vendors), experts are also warning customers to expect shortages for various smartphones, VR headsets, cars, and other tech accessories. The Foxconn and Pegatron closures in China, for example, are expected to potentially delay iPhones and AirPods production as factory workers are unable to resume work.
On Saturday, February 8th, the Nikkei Asian Review reported that China is blocking Foxconn from reopening its Shenzhen plant given the working and living conditions at that factory and that Foxconn had independently decided to keep its Zhengzhou plant closed pending government review. The Zhengzhou factory, aka, “iPhone city,” is where the bulk of the world’s iPhones are assembled. Bloomberg says that Zhengzhou might resume limited production the week of February 10th, but with a small number of workers who didn’t travel home for the New Year.
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.
The Quest had been on backorder since around the holiday season; retailers had initially said the headset would be available again in early February, but the date has been pushed back to as late as March 10th for the 64GB version.
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 on Monday, February 10th.
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.”
Similarly, products across the tech sector that were expected to ship in early February have now been delayed due to the virus. These include the Nintendo Switch console, games, and accessories, including the much-adored Animal Crossing edition (that one is specifically delayed in Japan), Ring Fit Adventure, and The Outer Worlds.
In its February 17th investor update, Apple also warned that revenue will be lower than expected because of coronavirus’ impact on iPhone supply and reduced retail traffic in China. The company did say that its iPhone manufacturing sites have reopened but that they are “ramping up more slowly than we had anticipated.”
After multiple tech companies either partially or fully pulled out of the Mobile World Congress (MWC) conference in Barcelona due to coronavirus concerns — including Sony, Amazon, Nvidia, LG Electronics, ZTE, and Ericsson — the GSM Association, which organizes MWC, canceled the show.
Some game developers are limiting their event travel as well. PlayStation, Oculus, and Facebook Gaming have pulled out of the Game Developers Conference, and Sony also announced it would be skipping Pax East.
While the World Health Organization has upgraded the coronavirus’ status to a global health emergency, it hasn’t necessarily recommended canceling global conferences like MWC. “There is no evidence at present to suggest that there is community spread in Europe, so WHO / Europe is not currently requesting that large gatherings are cancelled,” a WHO spokesperson said.
Huawei, which was expected to host a developer conference in February, has also postponed its event until the end of March. Week two of a major League of Legends tournament has also been indefinitely delayed since January 26th, but the league said it would be hosting online scrimmages starting on February 26th.LPL✔@lplenglish
We want to give a quick thank you everyone for the support when we announced our temporary hiatus for the LPL.
We will be hosting an online scrims league starting the 26th. Our primary concern is still keeping everyone safe but we are expecting some great entertaining matches!2,730Twitter Ads info and privacy280 people are talking about this
Similarly, Blizzard has announced that Overwatch League matches in February and March have been canceled, while the FIA has scrapped plans for an upcoming Formula E race that was slated to take place in late March. PUBG’s April global qualifier event set in Berlin has also been postponed until further notice.
The coronavirus death toll has risen to more than 2,200 while more than 76,700 people have been infected worldwide, as reported on this WHO map.
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