Via Financial Times

The breakdown of China-based electronics supply chains because of the coronavirus is delaying the arrival of computers and smartphones in shops, with experts warning that some companies are underestimating the impact of the disruption. 

Several electronics retailers have been told that it is taking up to three times as long for PCs and parts to be delivered. Industry experts said that only those brands able to pay upfront and work closely with component suppliers, such as Apple and Samsung, would be able to secure enough production capacity, as shortages ripple through the supply chain. 

“One channel partner in Australia was notified by key manufacturers that shipments can take up to 14 weeks, as opposed to the normal four weeks,” said Sharon Hiu, an analyst covering sales and distribution channels in Asia-Pacific at Canalys, the technology research firm. “Some channel companies have been given a 10-week estimate, while others have not been able to get a projected time of arrival at all.” 

Smartphones, headphones and computers were particularly exposed, said Suketu Gandhi, partner at consultancy Kearney, in part because retailers tended to keep fewer of these items in stock as newer versions were released frequently. 

Ms Hiu said shipment times for Dell computers to Australia had been extended from the usual three to five weeks to 10 weeks, and that notebooks and desktop computers of HP’s Elite series had run out of stock in some shops. 

IPC, an association of electronics industry companies, said last week that its members were told by their suppliers to expect a three-week delay in shipments on average.

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The warnings follow disruptions of factory operations and transport across China since late January, with companies struggling to return to full capacity. Production at contract manufacturers was “at 20 to 40 per cent of their previously expected output in February”, Canalys said last week. 

“It is complicated and very difficult to size,” Corie Barry, chief executive of Best Buy, the US electronics retailer, told analysts last week of the coronavirus impact. “We’re trying to weigh things like which factories are back up and running, and they’re all at varying capacities across Asia.” 

Investors are hoping for more detail from a quarterly operations briefing from Foxconn, the world’s biggest contract electronics manufacturer, on Tuesday. The company, the largest assembler of Apple’s iPhones, last month warned that the crisis would dent full-year revenues. 

Apple has warned that coronavirus disruptions would hit first-quarter revenues. But chief executive Tim Cook told Fox Business News last week that he was “very optimistic” China was getting the epidemic under control, adding that factories were reopening. 

Dell did not account for the virus in its full-year outlook but said it expected an impact in the current quarter on its sales in China. 

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Supply chain experts, however, believe the effects of the shutdown will linger because the disruption has led to shortages of components which only gradually become visible. 

Trendforce last week axed its global notebook forecast for the current quarter to 27.5m units from 35m units — a 26 per cent drop from the same period last year. Canalys expects global PC shipments this year to drop by 3.4 per cent in a best-case scenario and 8.5 per cent in a worst-case scenario. 

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Geoff Pollak, managing director with Alvarez & Marsal, the professional services firm, said some companies could cope with the disruption better than others — for example, if they had cash on hand to pay suppliers in advance. “As supply gets more difficult, there is an opportunity for suppliers to change payment terms, such as requiring prepayments,” he said. 

While the consumer electronics sector has been hardest hit, its travails could offer a glimpse of how other industries will be affected: 95 per cent of the Fortune 1000 companies buy components from China, according to research from State of Flux, a UK-based supply chain consultancy. 

“This really affects everyone,” said Alan Day, chairman of State of Flux. “It’s not just tech businesses.”