The Wuhan coronavirus is wreaking havoc within the global technology supply chain, as many Chinese provinces extend the new year holiday in an effort to contain the spread of the deadly disease.
Underlining the concerns for the tech industry, Taiwan’s Hon Hai Precision Industry, which is also known as Foxconn and makes the majority of the world’s iPhones, suffered its biggest share price fall in almost 20 years on Thursday.
Elsewhere, shares of Japanese electronics parts makers and other tech groups with exposure to China were hit hard, with Murata Manufacturing, Tokyo Electron and Sharp all suffering dips of more than 3 per cent as a result of anxieties about disruption to supply chains.
The wobbles came after the governments of six Chinese provinces, including manufacturing hubs crucial for the global technology industry such as Shanghai, Jiangsu, Guangdong and Chongqing, mandated that the return to work after the Lunar New Year be delayed by a week to February 10 for all but essential industries.
“The coronavirus creates a more uncertain environment than the trade war . . . and the scale of the impact is bigger than Sars,” said Gary Cheung, a director at Haitong Securities in Hong Kong specialising in industrial technology.
The growing disruption to the world’s second-largest economy comes as China’s health authority said on Thursday that 170 people had died from the coronavirus and nearly 7,800 cases had been confirmed worldwide.
By contrast, 8,098 people were infected by severe acute respiratory syndrome, or Sars, during the outbreak in 2003, which killed 774 people, according to the World Health Organization.
Mr Cheung said that the companies hit hardest by the outbreak would likely be those that relied on significant manpower in China — which, in addition to Foxconn, included Pegatron, the Taiwanese contract electronics manufacturer.
“Semiconductor manufacturing is heavily automated, whereas companies such as Foxconn and Pegatron rely heavily on labour-intensive assembly, which [is] more exposed,” said Mr Cheung.
Analysts said the most immediate impact would be felt by those with operations in Wuhan, the Chinese city at the centre of the outbreak. These include flat panel display television fabrication plants owned by China Star, Tianma and BOE, which are estimated to account for up to 9 per cent of global capacity.
The Chinese government has barred people from leaving Wuhan and Hubei, the province surrounding it, and severely restricted them from moving around in public — measures that have forced most industrial production in the province to grind to a halt.
DSCC, a consultancy focused on the display industry supply chain, said China Star was not expected to reopen until mid-March. “Thus, their Q1 ’20 shipments are most definitely at risk,” the consultancy said in a research note.
Because of the extended holiday in the six provinces, the technology supply chain could suffer beyond Hubei. Some 290 of about 800 plants named in Apple’s global supplier list are located in regions that have delayed returning to work.
However, it remains unclear how strictly the Chinese government is enforcing the work restrictions. Semiconductor and LCD panel fabrication plants cannot easily stop production without huge losses and therefore usually continue running through the holidays.
LG Display and memory chipmaker SK Hynix, both of which have plants in the provinces where the government ordered a delayed return to work, said their factories there had been operating normally through the lunar new year holiday and continued to do so.
Additional reporting by Song Jung-a in Seoul, Sue-Lin Wong in Shenzhen and Hudson Lockett in Hong Kong
Source: Economy - ft.com
