China is the global hot spot for growth in the electronics industry. Right now, it is also the epicenter for the SARS (Severe Acute Respiratory Syndrome) epidemic. In Asia, concern about the spread of this illness has meant travel cancellations, plant and office closures, worker absences, and more.
Will these disruptions hurt the electronics supply chain? Could SARS affect your company's design strategy or production flow?
In a March report headlined "SARS Virus Attacks the Electronics Industry," the Aberdeen Group says that the illness may have already short-circuited the electronics "mini-boom" in the People's Republic of China (PRC) via severe outbreaks in Guangzhou and Shenzen, which are important electronics manufacturing hubs there. Other Asian tech centers like Singapore and Hong Kong are feeling the effect too: Motorola temporarily suspended production at a Singapore facility after 305 workers were quarantined for SARS exposure.
Furthermore, travel and meetings have been greatly curtailed. The Asian face-to-face business norm has been replaced by facemask-to-facemask commerce, but more often by teleconferencing or Internet exchange. Many workers at companies including Hewlett-Packard and Intel are choosing to telecommute, rather than risk infection in the office.
In addition to a downturn in both demand for and production of electronics within Asia, the Aberdeen report cites a potential effect on worldwide electronics manufacturing: "The PRC is the source of many electronic components and low-level assemblies. For example, ac-to-dc power supplies... are invariably made in the PRC. Although a laptop can be assembled anywhere, it can't be sold without a power supply. Thus, SARS threatens the dependable supply of key-component building blocks, not just the assembly plants in China."
Just as importantly, the entire electronics assembly industry has a critical, no-second-source dependence on components made in the PRC, according to the Aberdeen report. The disruption of air cargo may also affect U.S. companies. Maritime transport is under less scrutiny, because it takes longer to make a trans-Pacific crossing than the virus' incubation period of under 10 days. Still, quarantined ports could cause delays.
Predictions from a second analyst group, iSuppli Corp., indicate "significant risk" to electronics production, particularly relative to the nearly 100% of LCD panels and the more than 60% of notebook PCs that China manufactured in 2002. However, iSuppli's Asia analysts claim that so far SARS has made little direct impact on the electronics supply chain. But on the flip side, say the analysts, there may be an increased demand for North American products, as buyers and brokers see the SARS outbreak beginning to interrupt Asian sources. Now companies relying on Asian parts must develop backup processes and contingency plans to ensure that their companies can maintain services in case any office closes.
Does the SARS threat on the electronics industry alarm you? Or like me, do you think prices may rise, but product will still get through? Has your company found a need to set up a contingency plan? E-mail me or post a comment to our Web discussion forum at www.elecdesign.com. In the meantime, Godspeed to medical science in conquering the SARS virus.