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OZ Retailers Facing Major Supply Problems Due To Coronavirus

Supply of goods to Australian consumer electronics and appliance retailers could fall as much as 50% as factories in China struggle to bring back production lines following the outbreak of Coronavirus also impacting the supply food chain are bans on inter Provence transportation as well as local travel bans.

Some retailers are looking to stop discounting, to preserve margins while also looking to get a higher return from the stock they already have in their warehouses.

Notebook manufacturers estimate their utilization rates will be 50-70%, depending on the numbers of workers able or willing to return to work and material supply conditions, display manufacturers have still not indicated when they expect their factories to reopen after the Lunar New Year holiday period is over.

In conversations with distribution executives in China yesterday we were told that some major TV assembly factories are currently negotiating with the Chinese Government to reopen factories with live in staff housed in dormitories where health officials can check their health.

External staff will not be allowed to travel to work.

A major TV distributor to Australian retailers told ChannelNews yesterday that when they contacted one key supplier they were told that the factory was shut down “indefinitely” as the parents of the owner and CEO had died from the virus and that all management were now quarantined and the factory shut until they got “An all clear” from Chinese Government officials.

DigiTimes reports that the coronavirus outbreak in China is set to have a widespread impact on the ICT supply chain.

Both LG and Samsung have told retailers in Australia that they are confident that they can keep up some level of supply with goods manufactured outside of China. “The problem is that if any components are supplied by Chinese factories, this could be a problem for factories in Japan, Vietnam, India or Thailand as full assembly is reliant on these components” said one affected distributor.

Although many factories and component manufacturers are supposed to resume production in China next week or in mid-February if no further complications occur, they cannot tell how normal their operations will be or whether their staff are going to return to work.

In the mobile device market, demand for 5G smartphones is likely to be hit by the outbreak, which in turn will dampen sales of mobile DRAM.

Taiwan-based notebook ODMs such as ASUS, Acer, MSI who operate their plants mainly in China, have estimated their production utilization rates will range from 50% to 70% after resuming operation following the extended Lunar New Year break, as employees’ return and supply of components and materials are being disrupted due to the coronavirus outbreak.

Crucial to the TV display food chain in Australia are LCD fab plants with many located in in Wuhan the epicentre of the virus outbreak.

Plants run by BOE Technology, China Star Optoelectronics Technology (CSOT) and Tianma Microelectronics, may suffer a shortage of upstream raw materials due to mounting transport curbs in China to contain the epidemic, according to industry sources.

Mobile DRAM demand uncertainty emerges: Mobile DRAM demand for smartphones is likely to disappoint in the first half of 2020, as the coronavirus outbreak may hit sales of new 5G-compatible phones, according to market sources.

Scenes of chaos and despair are emerging daily from China’s Hubei province where many components for appliances and consumer electronic goods are manufactured, the landlocked region of 60 million people where the new coronavirus dubbed 2019-nCoV was first identified in December, and where it has since cut a wide, deadly swathe is today a ghost town.

While cases have spread around the globe, the virus’ impact has been most keenly felt in Hubei, which has seen a staggering 97% of all deaths from the illness, and 67% of all patients.

The local health system is overwhelmed by the fast-moving, alien pathogen, making even the most basic care impossible.

It’s also an ongoing illustration of the human cost extracted by the world’s largest-known quarantine, with China effectively locking down the region from Jan. 23 to contain the virus’ spread to the rest of the country, and the world.

But Hubei — known for its car factories and bustling capital Wuhan — is paying the price, with the mortality rate for coronavirus patients there 3.1%, versus 0.16% for the rest of China.

Between Jan 23. and Feb 4., the number of officially recorded deaths from the coronavirus in Hubei grew by over 25 times, to nearly 500. Scores more likely went unrecorded because they weren’t admitted to hospital in time to be diagnosed.

 

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