2020 has been a crazy year already. From Australian bushfires to climate emergencies to US trade tariffs, the start of the decade hasn’t been very positive. Not only this, within the last few months there has been something much worse brewing – the Coronavirus (Covid-19).
It was January 30th, 2020 when the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a “public health emergency”. The virus first broke out in Wuhan late December 2019 which spread like wildfire – causing over 372,000 casualties in less than seven months. The virus has now been confirmed in over 188 countries and has infected over five and a half million people worldwide. Things haven’t got much better – on March 11th, 2020, World Health Organization confirmed the Coronavirus a pandemic. A pandemic is the term used for a disease which is spreading between multiple people and counties at the same time. The last time a pandemic occurred was 2009 with swine flu. With UK schools closed as of Friday 20th March, it was no surprise we have been on lock down for almost three months.
How is this affecting the electronics industry?
Within an article from IPC – electronics manufacturers anticipate at least a five-week product shipment delay from suppliers due to the coronavirus epidemic, according to a survey conducted by IPC, a global electronics manufacturing association. The group says shipping delays from China and other countries where the virus has spread are already having negative impacts on manufacturers. Roughly 65 percent of manufacturers report their suppliers expect, on average, a three-week delay. However, electronics manufacturers expect delays to be longer than what their suppliers are currently quoting. On average, executives expect shipment delays to be at least five weeks.
“The delays will likely have ripple effects for the rest of the year,” said John Mitchell, IPC’s president and CEO. “The longer China is affected by the epidemic, and the more it spreads to other parts of the world, the supply chain will experience more and varied strains and disruptions.”
The virus is not only affecting companies within the industry, but also events. SEMICON Southeast Asia 2020 has been postponed from 12-14 May 2020 to 11-13 August 2020 due to concern surrounding the virus. “After close consultation with our stakeholders, which include partners, exhibitors, industry peers and the general community, we have made the necessary decision to postpone SEMICON Southeast Asia 2020,” said Bee Bee Ng, president of SEMI Southeast Asia.
Some of the major companies within the industry to get affected due to COVID-19 include Apple Inc., Canon Inc., GoPro Inc., Hitachi Ltd., Huawei Technologies Co. Ltd., LG Electronics Inc., Nikon Corp., Panasonic Corp., Samsung Electronics Co., Ltd., Toshiba Corp., and several others For instance, Apple Inc. delayed the launch of the iPhone 9 due to this pandemic outbreak in China. The company also announced that it would not meet previously announced sales projections for the first quarter.
However, some companies seem to be benefiting from COVID19. DELO closed the financial year that ended on March 31 with a turnover of EUR 163 million. This is an increase of almost five percent compared to the previous year (EUR 156 million). Despite increasing coronavirus restrictions worldwide, even the last quarter of the fiscal year contributed to this result. The manufacturer of high-tech adhesives and other functional materials achieved about one third of its sales in Europe and North America. Another third each was earned in China and the remaining Asian countries. Accordingly, China was DELO’s largest single market, followed by Germany with an 18 percent share of sales and Singapore with 14 percent. Apart from China as a traditional growth driver, the strongest increases were recorded in South Korea and European countries such as Italy. In terms of sectors, the consumer, automotive and industrial electronics industries continued to be the most important pillars.
As you will already know, travel is extremely restricted globally. Recently, Boris Johnson encouraged workers to go back to work if they cannot work from home. Very few individuals are commuting back to work via public transport as you are almost parented to be in close proximity with others. Stated by the Telegraph, face masks should be mandatory on planes and trains as it reduces coronavirus spread by 98.5 per cent, the Chief Executive Officer of Ryanair has said. Michael O’Leary told BBC Radio 4’s The Today Programme: “If you really want to do something that’s effective wear masks. “If everybody is wearing masks you eliminate the risk of spread of Covid-19 by 98.5 per cent. So let’s take some effective measures.” The electronics industry is widely affected by travel restrictions – especially as trade shows, meetings and events obviously cannot take place at the moment. At the moment, travel restrictions seem to be easing off very slightly. Starting from Monday 1st June, up to six people are now allowed to to meet up outside but still abide by the social distancing rules.
ECIA’s Chief Analyst Dale Ford has posted the results of the 6th survey of members regarding their response to the Coronavirus / COVID-19 pandemic. This crisis has reached every corner of the world and significantly disrupted markets and supply chains in every country. (See Figure below) The extreme uncertainty and volatility associated with this crisis has created a need for visibility on how it is impacting the electronic components industry and the supply chain. In order to provide important visibility, ECIA began conducting surveys of member manufacturing and distributor companies at the start of February to gain an understanding of this ever-evolving situation. ECIA has published survey results on a bi-weekly basis to provide continuous updates to our members.
To read the complete Survey Synopsis, please go to www.ecianow.org.
How is the virus affecting the global economy?
The virus has already caused many knock-on effects for the global economy. From lengthy manufacturing time frames to fewer sales, there is global fear of the economy slowing down to a halt. According to City A.M, Bank of England governor Mark Carney has said the economic shock from coronavirus “could prove large” but sought to reassure the public that it will “ultimately be temporary”. Stated by Economic Times, coronavirus could cost world $1 trillion. The worrying prospect that the Covid-19 outbreak could become the first truly disruptive pandemic of the globalisation era is renewing doubts over the stability of the world economy. Many workers are already facing disruptions to their daily routines as schools, companies and local governments implement precautions to curb the coronavirus outbreak. Already, many organisations have restricted travel along with home based working arrangements. On the 11th March, Trump stated that he has suspended all travel from Europe to the US – excluding UK. However, he included the UK in this ban a few days after. The travel ban has caused a huge plunge in the markets. According to The Guardian, Cineworld has slumped 30% after it warned it could breach its banking covenants if cinemas are forced to close. Not only this, Wall Street is heading for another slump too – trading in futures contracts have been suspended ‘limit down’, after falling 5%.
However, things may be looking up for the electronics industry. Boris Johnson has stressed that in order to have a chance at tackling this virus – we need more ventilators. For many patients critically ill with COVID-19 – a ventilator could be a matter of life or death. The structure of the machine is to get oxygen to the lungs while removing carbon dioxide. This is essential for patients who are too sick to breathe on their own. “The fact the government is asking manufacturers to make a different product to what they normally make is unprecedented since the World War Two,” Justin Benson, from the consultancy KMPG, said. “It’s a relatively complex piece of equipment with lots of components and a dedicated supply chain. So, asking someone who makes a car to produce a respirator would take them some time.” This would result in more work for many electronic manufacturing companies and potentially creating new jobs. According to the Guardian, the first batch of ventilators will be 5,000 from Oxfordshire-based Penlon. The ventilator specialist is drawing on manufacturing support from firms including Formula 1 teams McLaren and Mercedes, Ford, Siemens and Meggitt. Not only this, Tesla are doing a great job at contributing to tackle the virus. Stated from Forbes, the coronavirus crisis has led Elon Musk to jump into the medical device industry, with SpaceX fabricating components for Medtronic MDT ventilators, corporate donations of BiPAP breathing machines that can be modified for use as non-invasive ventilators and promising to use a Tesla TSLA factory to produce ventilators. Now Tesla engineers have designed a prototype ventilator that uses parts adapted from electric vehicles.
China is known as the capital for manufacturing and supports many global companies due to its relatively low-cost production rates and high-quality products. According to South China Morning, Coronavirus originating in Wuhan has sent agriculture commodity prices tumbling and led to extended shutdown of Chinese factories and markets. A quote from PBS, the risk is that when the global supply chain is disrupted–most recently by the shuttering of factories due to the virus in China–many companies have few alternatives to fall back on. That is especially true of smaller and medium-sized companies that do not have operations in multiple countries. To solve this, some companies have announced they are shifting their operations to other countries, largely in Southeast Asia. An overwhelming majority (84 percent) of electronics manufacturers and suppliers are worried about the epidemic’s impact on their business operations. Delays in receiving supplier inputs can lead to factory downtime, higher average costs, transportation bottlenecks, pressure for alternative sourcing, delayed sales, and delayed prototyping that slows the introduction of new products. According to BBC, factory activity in China fell at a record rate in February, as manufacturers closed their operations to contain the spread of coronavirus. The country’s official measure of manufacturing activity – the Purchasing Manager’s Index (PMI) – dropped to 35.7 from 50 in January. It shows the virus is having a bigger impact than the financial crisis that shook the world last decade. “The delays will likely have ripple effects for the rest of the year,” said John Mitchell, IPC’s president and CEO. “The longer China is affected by the epidemic, and the more it spreads to other parts of the world, the supply chain will experience more and varied strains and disruptions.” Moving forward, we may have to adjust to not relying on only one manufacturing source.
These are very difficult times for individuals and businesses due to the uncertainty of what the future holds. Lets start with the electronics industry striving to produce ventilators. Ventilators are very difficult to manufacturer due to its unique structure and programming. “These are extremely sensitive machines with not only a lot of hardware, but also a lot of software. If one of the components does not work correctly, the whole machine shuts down and cannot be used anymore,” Jens Hallek, CEO at Hamilton Medical said. However, large and small companies are joining forces in order to tackle the virus once and for all. According to the Daily Mail, a family run engineering company located in Wales are developing a new ventilator to treat the patients. It is said they are on route to producing 100 ventilators a day. Engineers CR Clarke – who usually design plastic fabrication equipment for industry – were approached by Dr Rhys Thomas ( NHS Senior ) who was concerned at the lack of intensive care unit ventilators.
According to many sources, the ventilator production target isnt looking too posititve. Stated from the BBC, manufactures have said they cannot produce enough ventilators within the deadline. Health officials expect the virus to peak in around two weeks time (mid April) and need 30,000 ventilators – while currently only having 8,000 to hand. However, things aren’t looking too bad if Dyson approve their order from the Government. Stated from BBC, Dyson has received an order for 10,000 units, pending regulatory approval. The firm, headed by British inventor Sir James Dyson, has drawn up its design from scratch in collaboration with Cambridge-based medical firm The Technology Partnership. As the shortage of ventilators are becoming more crucial for tackling the virus, “health professionals may be obliged to withdraw treatment from some patients to enable treatment of other patients with a higher survival probability,”according to the BBC. “This may involve withdrawing treatment from an individual who is stable or even improving but whose objective assessment indicates a worse prognosis than another patient who requires the same resource.” The Prime Minister Boris Johnson tested positive for Coronavirus late last month, since then he has been hospitalised for a series of routine tests. Stated from the BBC, Prime Minister Boris Johnson is “still very much in charge of the government” despite spending the night in hospital with coronavirus, Housing Secretary Robert Jenrick has said. This makes things more challenging for Boris as he is jugging managing the country along with his own health. “I still have a temperature. So in accordance with government advice I must continue my self isolation until that symptom itself goes,” he said. “But we’re working clearly the whole time on our programme to beat the virus.” Hopefully Boris will have a speedy recovery and be back to doing what he does best soon.
On the other hand, the virus has caused many challenges for manufacturers and suppliers. According to Business Insider, a survey was carried out by IPC on affects the virus is having on companies within the electronics industry. IPC found that around 65% of respondents were told by suppliers to expect delays of around three weeks in shipments due to the outbreak. “I believe the worst is yet to come,” one anonymous manufacturer told IPC. “The Chinese local government is fully overwhelmed with this process and could take weeks to get flushed out for factory production starting.” Overall, I expect further delays on manufactured electronics. Another quote from Business Insider, some manufacturers told IPC that they were rerouting supply chains to avoid areas in China heavily affected by the coronavirus. DuBravac said many manufacturers are keen to establish a “dual-sourced” supply chain regardless of the outbreak, to keep from overly relying on one supplier or region. When it comes to the impact that the coronavirus will have on their business, 30% of survey participants admitted to being extremely concerned, while 54% said they were somewhat concerned. The survey ran between February 11 and February 16.However, as China was recently uplifted of its lockdown, manufacturing and delivery times should slowly shorten within the next few weeks.
Many global industry trade shows were sadly cancelled or postponed due to COVID-19. These include The Electornic Component Show, Mobile World Congress and EDS. For many organisations these events are a huge source of their marketing budgets and reliable income. NürnbergMesse usually welcomes around 150,000 visitors at the embedded world events. However, they saw approximately 900 exhibitors in the halls. Global semiconductor manufacturer, STMicroelectronics, who usually have a massive presence at the show, released a statement: ‘STMicroelectronics has been closely following the situation related to the novel coronavirus outbreak and has taken a number of precautionary measures to ensure the health and safety of its employees worldwide. As an additional measure, the company has taken the decision to withdraw from exhibiting at MWC 2020 in Barcelona and at embedded world in Nuremberg.’ Many other companies, including ARM, Cypress, Digi-Key, Intel, Microchip, Mouser, NXP, Renesas, Silicon Labs, Texas Instruments and Xilinx also made the difficult decision to withdraw from the show, putting the health and safety of its employees and customers first.
Let’s hear what the industry professionals have to say:
SOS Electronic: At this time, we have not detected any specific interruptions within our supply chain. However, delivery dates for certain products may ultimately be affected in the future. Therefore, we cannot guarantee them with certainty, and we encourage customers to place new orders in time to avoid coronavirus problems that may affect their business.
Mouser Electronics: Regarding travels, we have restricted all travels to Asia and within Asia. We have recently also stopped all travels to Italy and are limiting all other travels to Europe, within Europe and to/from USA. It is highly likely that we will see very few people flying for at least the next month, unless exceptional circumstances, and we see the same from most of our supplier partners. As the situation changes, we will review. We have ensured all offices globally have masks available as well as sanitizer to clean hands plus re-emphasizing good hygiene rules.
Digi Key: At Digi-Key, our thoughts and prayers go out to everyone impacted by COVID-19 worldwide, and our primary concern is for the health and safety of our team members, customers and business partners. Our business model positions us with substantial inventory to offer minimal disruption to our customers, and we have worked closely with our multiple carrier partners to mitigate impact on cargo plans. We’re providing updates and FAQs on our website for our customers and we’re in constant communication with our suppliers.
By Amy Leary, Marketing Manager at eBOM.com