How will the coronavirus impact the electronics supply chain?

The electronics industry and the global economy as a whole has been severely hit by the Coronavirus outbreak which has recently been renamed by the World Health Organization as COVID-19 according to New York Times. The WHO said it had chosen a name for the disease that makes no reference to places, animals, or people to avoid stigma.

There is currently a quarantine in place for thousands of people across China and further afield which has left some people working from home to try and cope with the backlog of work.

The electronics supply chain has faced many hurdles in recent years including the US-China trade war, and the current situation has created further uncertainty. With flights being cancelled in and out of China, there are delays at ports and freight is being held up at customs.

Many major electronics companies have component manufacturing and PCB assembly facilities in China, including Wuhan, the epicentre of the novel Coronavirus.

Dependence on China is proving to be a problem and creating testing times for the electronics market. With the Lunar New Year holiday already having an impact on China’s supply chain the addition of the undetermined extension means it is unclear how long the impact will last. According to Forbes, the extension of the Lunar New Year shutdown has created a backlog in the world’s supply chain that will not be repaired for many weeks (at a minimum), and there is still a lot of uncertainty when factories will actually start up again, and what will happen when they do.

With factories closing for longer than expected, lead times for many components will increase, which in turn means excess electronic component inventory that manufacturers have on hand may become more valuable in the open market. Electronics manufacturers with surplus components may find that their stock could be redistributed to help combat the shortages in the market; those same manufacturers may also be looking to independent distributors to source components as lead times increase.