The emergence and spread of COVID-19 can have a great impact on the world economy and it is even believed that it could cause a recession in Asia, with some countries cutting their growth forecast for the coming months.
China is the second largest economy in the world and is one of the countries that exports the most. In addition, it is the ‘factory of the world’. Much of the consumer electronics products sold on the planet are manufactured in the country and assembled by local assembly companies. This is the case of Apple or HP, whose products are produced by Foxconn. In addition, Chinese brands dominate the sector, with Huawei, Xiaomi, Lenovo … in the lead.
In China some cities and their factories and industrial estates have not yet resumed production. Analysts say the technology supply chain could suffer a severe blow, causing delays and product shortages. And in the face of indefinite stoppages and this lack of supply, manufacturers, retailers and exporters would have no choice but to raise prices.
Some industry experts estimate that smartphone prices could increase by 6% to 7% due to the coronavirus and everything around it. In addition, featured phones could be the most affected. Many mobile phones with basic functions could see a price increase of more than 10% . This extra cost could come in the next two or three weeks, according to the sales manager of megUS Mobile, a company that sells low-mid-range smartphones in India.
Production could take weeks to normalize
Although the threat of the coronavirus begins to slow down and be controlled, it could still take a month or two for the situation to normalize. Thus, Chinese manufacturers could take weeks to reestablish their operations , including supply chains and logistics. This is explained by analyst Gerrit Schneemann, a senior smartphone analyst at consulting firm IHS Markit, in an email sent to Quartz . And all this assuming that things do not get worse.
Another problem is that some countries could impose restrictions on China on its exports or stoppages at customs, making the delivery of some products much more difficult.
Companies from outside China, such as Sony, Samsung or Google have gradually moved their factories out of China to reduce their dependence on the country, taking them to other territories with even lower production costs, such as India or Vietnam. In that sense, its impact would be less. However, they still depend on China to supply some components . With which, they could also be affected in a certain way to have basic things for phones, such as screens or sensors.
However, Apple itself has reported that due to the coronavirus its production and demand for iPhones has been affected and that will affect the results of its second quarter. The factories that produce devices for the apple firm have had to close temporarily and the company has also closed some of its stores on a preventive basis. Thus, Apple already warns that it will be difficult to meet its forecasts for Q2.
