With the Chinese coronavirus epidemic disrupting component supplies, availability and launch of electronic products, companies anticipate an inevitable impact on the supply chain as they start looking for alternative suppliers.
China, which exports all critical components like mobile displays, open cell TV panels, printed circuit boards, capacitors, memory, etc. accounts for 75% of the total value of components used in TVs and almost 85% in case of smartphones.
The outburst of the virus has triggered the shortage of supply leading to a hike in component prices by 2-3% by the Chinese vendors. It has also put pressure on top brands such as Xiaomi, Vivo, Oppo, OnePlus, TCL, Lenovo, Apple and RealMe.
Further, the reduced number of flights to and from mainland China has decreased the belly hold air cargo capacity further hitting the supply chains.
The rapid spread of the virus after the Chinese New Year has put the industrial activities on hold in the country.
According to reports, the authorities in many Chinese cities have extended the New year holiday scheduled to end on January 31 to February 9. Moreover, the suspension of cross border travel by Hong-Kong, the gateway to China for freight and business will badly hit the production and the supply chain.
“Factories in India were prepared for the usual Chinese New Year shutdown. But several cities there have extended the holiday, and companies have asked workers not to report for work for the next few days. This will likely have an impact on manufacturing in India since the extended holiday was not factored in,” a top senior executive at a leading smartphone brand informed ET anonymously.
However, Apple CEO, Tim Cook during earnings call on Wednesday assured to work on a mitigation plan for the loss and tapping of the alternative supplier, to which the Electronics & Appliances Manufacturers Association president Kamal Nandi said, “it would be difficult to quickly develop alternative supply sources for components.”
Apart from Electronics, the auto industry is also in a tough spot after China starts playing a significant role in the Indian Market. With electric mobility taking a center spot in India, Chinese companies like SAIC, BYD, Great wall and FAW are likely to occupy a significant portion in the upcoming auto expo to be held in Greater Noida from February 5-12.
MG Motors (a subsidiary of SAIC), which is enjoying its run in India also comes under the spot as supplies from China come under a squeeze.