Coronavirus Axes Electronics Industry

Apple warns that coronavirus is hurting profits | DW Business [Video]

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Coronavirus Axes Electronics Industry

Apple fans have their Christmas in March, and the treats had to be great this year: Apple iPhone 12 and Apple iPhone 9 / SE 2. Alas, the Grinch stole the holiday from us. The March event is cancelled due to the COVID-19 coronavirus pandemic.

Online streaming would be healthier and even easier to launch than a public offline event, one could mention, but the problem is that new iPhones won’t arrive for another couple of months. Not only the presentation of new models is cancelled, the released dates are pushed back too. Facing the outbreak of the disease China shut down most of its factories, businesses and almost all non-food stores. Even if the employees weren’t ill, they had to stay home in self-isolation to prevent the further spread of the infection. It doesn’t take a degree in economy to see that the problems in the world’s production hub will affect the whole industry.

Apple suffered a severe blow as both the supplies and the demand are down and will probably fail to meet its second-quarter financial guidance. The new plants in India can’t save the day, because the country has reported several cases already, and considering the scarcity of water supply and sewage systems there, it will likely face a massive outbreak of COVID-19 very soon.

Apple suffered a severe blow as both the supplies and the demand are down and will probably fail to meet its second-quarter financial guidance.

Samsung, that moved its supply chains to Vietnam, has to put up with the delays as well, although the situation is improving now. Domestic Asian companies like Huawei, Xiaomi, Lenovo, Oppo, which invest hard in flagship devices, will have to struggle with two grave problems. For these manufacturers the production decline is going to be aggravated with the significant decline in the demand due to massive lay-offs and small businesses suspensions since January. For Huawei, in particular, it may become the last straw.

In March things seemed to look up: South Eastern Asia survived the worst of the epidemic and both China and Vietnam are slowly reopening their production lines. However, the rest of the world, the USA included, is in danger and countries hurry to close their borders crippling the shipping schedules.

Thus the electronics industry faces three serious problems his year:

production delays
shipping delays
low demand / low revenue.

The last problem is the most threatening to the whole industry. It’s common knowledge that new phones nowadays are about luxury, not communication or media, but unlike other luxury items, phones lose their value very quickly. A two-year-old mobile is as good as a new one if not slowed down by the manufacturer, but people buy new models because they are hotter, because they are touted as the fastest, the smartest and you name it. For phone makers it’s like riding a bike – your balance is fine as long as you pedal. I doubt that a state-of-the-art flagship phone or tablet will be anyone’s priority with a recession in the economy we witness today. Users are going to stick to their previous phones or swap them for less expensive models. When I use the “expensive” word I don’t mean just a price tag but also the repair expenses one can pay. As a rule, premium models are very fragile, hard to repair and (I’m sorry to have to mention it) have a lot of bugs.

We don’t know where we will be when the coronavirus pandemic is over, but Apple and other manufacturers will have to fight hard to save the industry. Perhaps, they should turn to making drones. These worked brilliantly during the quarantine in Wuhan.