The Coronavirus Has A Significant Impact On Global Supply Chain
Coronavirus has caused many Chinese factories to temporarily shut down, delaying the production and shipment of many essential technology products to the U.S.
The new decade brought with it a new global health emergency: the Novel Coronavirus (COVID-19). To date, there have been over 95,000 confirmed cases of the coronavirus across 79 countries, and over 3,200 people have died. Understandably, most people have been focusing primarily on the virus’s threat to human health.
However, the human coronavirus has a much more far-reaching impact, affecting politics, economies, technology, and supply chain across the globe. The United States’ supply chain, in particular, is closely tied to Asia, and mostly China. From technology Americans use daily cell phones, iPads, navigation systems in cars to designer clothing and medical supplies, a considerable percentage of these items are imported into the U.S. from China.
Officials across China have ordered office buildings, retail stores, and even many large factories to shut down temporarily, to support quarantine efforts. While some companies were allowed to reopen February 10th following the Chinese Lunar New Year holiday, many remained closed until March 1st and several are still not open.
“Even in our area, a lot of things that you can easily go to the store and pick up or get through, in our case, our distribution channels, are now constrained. Things like TVs, monitors, all sorts of technology,” said Luis Alvarez, CEO of Salinas, CA-based Alvarez Technology Group, in a Tech Talk interview. “We’re being told, ‘Hey this might not be available for two or three months,’ because you can’t just start a factory March 1st and expect it to begin producing what it had been producing previously. It’ll take several weeks before it gets into motion.”
Those several weeks will, in all reality, be more like a few months at least. Spring is when many tech companies announce new product releases and begin to ramp up for the summer sales season, stocking up on bulk materials and products. The weeks-long production halt at Foxconn, the Zhengzhou, China, factory responsible for making over half of the world’s iPhones is expected to delay the release of new iPhones and AirPods.
Some companies have been able to shift part of their production out of China. Little Tikes’ Hudson, Ohio, factory has taken on additional production but is close to exhausting its supply of raw materials, which come from China. There are stories like this across the country, affecting everyone from startups to some of the biggest corporations in the world. Even Tesla temporarily closed its Shanghai factory, completely halting the production of its Model 3.
A Ripple Effect
Aside from just reopening the factories, there are other concerns. Companies plan to increase production to get back on track, which means they will need more raw materials that are already in limited supply. Besides, factories are required to provide their employees face masks and protective clothing and there are some concerns over whether enough of them can be made when workers return, as these items are primarily made in China.
With the arrival of March, factories across China are gradually getting back to work. American businesses are eagerly awaiting shipments, hopeful that the setback remains limited to just several weeks and doesn’t extend into several months.