Electronics Makers Expect Weeks-Long Shipment Delays Amid Coronavirus Outbreak in China

February 26, 2020 Updated: February 26, 2020
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Electronics manufacturers are concerned that there could be weeks-long shipment delays from their suppliers due to the novel coronavirus outbreak in China, a key component of many tech supply chains, according to a recent survey.

IPC, a global electronics manufacturing association, surveyed its members between Feb. 11 and Feb. 16. The respondents were 150 companies including original equipment manufacturers (OEMs), electronics manufacturing services companies, printed circuit board (PCB) fabricators, and industry suppliers.

They expressed that if the delays continue, it could impact this year’s sales revenues.

The survey found that about 84 percent of manufacturers and suppliers are concerned about the virus outbreak’s impact on their business operations.

About 65 percent of respondents said that they had been told by their suppliers that their shipments will be delayed due to the outbreak.

Thirty-seven companies (42 percent) said they were told by suppliers to expect a one- or two-week delay, while 44 companies (49 percent) said the expected delay could be three to four weeks.

However, the surveyed company executives said they believed the delay would likely be longer than what their suppliers told them—at least five weeks. Only 55 percent of respondents said they expect the delay to be fewer than four weeks.

“The delays will likely have ripple effects for the rest of the year,” said John Mitchell, IPC’s president and CEO, according to a Feb. 25 statement.

Mitchell added: “The longer China is affected by the epidemic, and the more it spreads to other parts of the world, the supply chain will experience more and varied strains and disruptions.”

The escalating coronavirus outbreak began in Wuhan, capital of central China’s Hubei Province.

The virus has since spread to at least 40 countries and regions, killing at least 50 people outside of mainland China.

Inside China, tens of thousands have been infected, with over 2,000 reported deaths, though expert research, leaked documents, and eyewitness accounts have shown that the Chinese regime is underreporting cases.

According to the survey, delays in receiving supplies have many consequences, such as postponement in design and prototyping, which could in turn lead to delays in introducing new products next year, delayed sales, and revenue shortfall that will never be recouped.

“Companies report they are seeking alternative sourcing, including looking outside of China to places like South Korea, India, and domestically in both the United States and Europe,” the survey said.

“In most cases, it’s not easy for manufacturers to switch suppliers, if that’s what turns out to be necessary,” added Mitchell, noting that the process could take a lot of time and money.

IPC pointed out that it was told by some companies that their inventory on hand can “weather supply delays of up to two or three months.”

“Delays beyond April and May could lead to missed sales opportunities during the 2020 holiday shopping season,” the survey stated.

On Feb. 17, Apple said in an investor update that it will not meet its revenue estimate for the March quarter due to the outbreak.

It explained that its worldwide iPhone supply “will be temporarily constrained” because its manufacturing partners, although outside the epicenter of the outbreak in Hubei province, are ramping up “more slowly than we had anticipated.”

“These iPhone supply shortages will temporarily affect revenues worldwide,” Apple added.

Another factor is the demand for Apple products has been impacted by the closing down of all Apple stores and many of its partner stores in China.

“Stores that are open have been operating at reduced hours and with very low customer traffic,” Apple said.

Follow Frank on Twitter: @HwaiDer