The recent outbreak of the deadliest coronavirus (COVID-19) from Wuhan province of China has multiple effects on the various industries, including consumer electronics, across the globe. The epidemic has stapled the global consumer electronics industry from suppressing demand to hitting the production of parts and subsystems. The smartphone segment was expected to witness lucrative growth in 2020 due to the uptake of 5G, however, it is now expected to more likely split between the second half of 2020 and the first half of 2021. Moreover, following the spread of COVID-19 and its effect on the consumer electronics industry, a decline of around 10% in the unit shipment of smartphones is expected in the first quarter of 2020 as compared to the first quarter of 2019. Further, it is also expected that smartwatches, notebooks, monitors, TVs, and smart speakers will see a decline of nearly 16.0%, 12.0%, 5.0%, 4.5%, and 12.0% respectively in the first half of 2020.
China, an epicenter of COVID-19, has hit a hard brake on its consumer electronics manufacturing capability. International Trade Union Federation (ITUF) estimates that China is the largest producer of the world’s electronic and electronic components across the globe. The abundance of low-cost labor has made the country competitive in terms of many low-cost, labor-intensive manufactures in international markets. Due to which, manufactured products constitute a significant share of the country’s consumer electronics trade. A substantial amount of China’s imports is comprised of parts and components that are assembled into finished products, such as consumer electronic products and computers, and then exported. Shipping delays from any country affected by the COVID-19 virus, especially from China, can cause several negative impacts for manufacturers.
Several US, European, and Asian-based consumer electronics manufacturers rely on semi-finished products from China in order to produce finished good in their factories. Delays in such products result in the delay of production of finished goods which ultimately leads to lower capital utilization rates, higher average cost, and suboptimal financial performance. Moreover, it also leads to large demand and supply gap in the market place as if the production does resume with the return of supplies from China, manufacturers will be unable to take on new orders because they will be fulfilling existing orders. Further, the spread of COVID-19 is also affecting the set projects of the country that aims to boost the Chinese economy in the near future. Announced in 2015, the “Made in China 2025” is one of the ambitious projects aimed at increasing the competitiveness of Chinese manufacturing industries including consumer electronics and automotive. The goal of the project is to foster Chinese brands, boost innovation and reduce the country’s reliance on foreign technology by making the nation a major or dominant global manufacturer of various technologies. As per Chinese media, this initiative is aimed to transform China from a manufacturing giant to global manufacturing power by 2049. For instance, the government of the country plans to have a goal of achieving 40% of domestically manufactured basic components and basic materials by 2020 and 70% by 2025. However, due to the recent outbreak of COVID-19 across the globe, which has caused plant shutdowns and quarantined workforce, the set target of the country is likely to be delayed.
