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Coronavirus to slow production of phones, chips

By Adeyemi Adepetun
12 February 2020   |   3:51 am
With the rampaging coronavirus outbreak in China spreading very fast and taking a toll across several sectors of the economy, the technology industry

With the rampaging coronavirus outbreak in China spreading very fast and taking a toll across several sectors of the economy, the technology industry is said not to be immune.

This is because it has been confirmed that some sub-segments of the industry are going to be impacted. These include the Smartphone, emerging technologies, tech exhibitions, and others.

According to the chip maker, Qualcomm Inc, the coronavirus outbreak in China poses a potential threat to the mobile phone industry, with a possible impact on manufacturing and sales.

The comments by Qualcomm, the world’s biggest supplier of “modem” chips that connect mobile phones and other devices to wireless data networks, dragged down chip stock shares despite signs that an industry downturn was ending.

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Qualcomm’s Chief Financial Officer, Akash Palkhiwala, on a conference call with investors following the release of quarterly results, according to Economic Times of India, said the company expects “significant uncertainty around the impact from the coronavirus on handset demand and supply chain.”

The San Diego-based chip supplier forecast revenue for its fiscal second-quarter largely above Wall Street estimates, in the latest sign that the protracted slowdown in the global chip industry is easing.

The forecast was wider than usual because of the outbreak in China, which has killed hundreds and sparked fears around the world.

On the conference call, Qualcomm officials tried to calm analyst concerns over the virus, saying the biggest 5G markets this year are expected to be in the United States, Korea, and Japan, and that the company could weather disruptions.

As stated, China is a manufacturing base for Apple iPhones, Macs and iPads, and accounts for roughly 20 per cent of Apple’s revenue. The American multinational company is among the top five smartphone vendors in China and arguably the most successful US technology firm in the country.

Checks showed that companies including Huawei, Xiaomi, Oppo, Tecno, Infinix, among others have production lines in China, and their production capacity will be reduced due to the outbreak.

As of August 2019, revenue for the Smartphone Manufacturing industry in China increased at an annualized rate of 25.8 per cent over the five years through the end of last year. In 2019, industry revenue grew by 22.1 per cent, to $259.1 billion, mainly due to increased exports and growing demand for third- and fourth-generation (4G) smartphones.

Exports accounted for 59.2 per cent of industry revenue in 2019, while demand for smartphones grew strongly over the past five years, due to the rapid development of 3G and 4G technology, an abundant smartphone product portfolio, and competitive product pricing.

An article on ITWeb quoted the CEO of World Wide Worx, South Africa, Arthur Goldstuck, who said in a worst-case scenario, the coronavirus could result in reduced business activity, trade, and tech product shipment, potentially creating scarcity, which would lead to increased prices, and shift the balance of sales away from Chinese brands to South Korean, Japanese and US brands.

“Given that Apple’s stellar results for the last quarter of last year were based partly on its strong showing in China, where it has entered the top five of smartphone vendors, it is the global manufacturer most likely to see a significant impact on sales.

“For other manufacturers, who do not rely on dedicated stores and also sell online, sales will only be constrained by supply chain issues. Samsung will be the big winner, but it would also be an opportunity for LG, Motorola, and Sony to regain market share if they can reduce reliance on Chinese manufacture,” explains Goldstuck.

Speaking in response to The Guardian inquiries on the matter on possible impact in Nigeria, the Director-General, Delta State Innovation Hub (DSHub), Chris Uwaje, said: “I advise the entire ICT Industry Ecosystem, and especially the Fintech players in the banking and Finance sector to ensure that their best skilled IT manpower (both Software and Hardware) are specially protected and constantly counseled about cononavirus.

“This is important because if they go down, they will be very difficult to replace at short notice. Remember that the 34 years old Chinese Medical Doctor – a vital skill resource – who discovered and Whistle-blowed the incident is dead. Coronavirus can deliver a critical blow to the ICT performance sector,” Uwaje stressed.

The President, Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, differed on the impact of the outbreak on the ecosystem.

According to him, the impact will be positive due to the need for ongoing communication that will happen between China and the rest of the world. “A need to replace air travel and physical presence with communication technology in order to communicate with loved ones and continue business and meetings using online communication tools will improve the prospects of telecommunications across the world.”

Meanwhile, the yearly Mobile World Congress (MWC), organised by the Global System for Mobile telecommunications Association (GSMA), scheduled for Barcelona from February 24 to 27, has been affected by the coronavirus outbreak.

Amazon became the latest big tech company to withdraw from global tech trade show over the outbreak, after LG, NVIDIA and Ericsson also pulled out over the past week.

Nokia said it is still contemplating its decision to attend the event, which attracts over 100,000 visitors to Barcelona, Spain.

“Due to the outbreak and continued concerns about the new coronavirus, Amazon will withdraw from exhibiting and participating in Mobile World Congress 2020,” according to a statement released on Sunday.

he GSMA, in a statement, said while its sympathy goes to all those affected by the coronavirus, it has taken preventative measures to ensure the health and safety of attendees.