February 10, 2020

Newsy Today

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Why coronavirus could delay delivery of your new smartphone

The electronics market, a new victim of the coronavirus? Faced with the quarantines put in place by Beijing to deal with the epidemic that has killed more than 900 people in the country, many players in new technologies have been forced to stop their production in China. A decision that is not without causing some concern, including in France: and if it would ultimately cause a shortage of stocks worldwide?

The most emblematic of these groups is undoubtedly Foxconn. This Taiwanese company, considered to be the largest in the world with more than a million employees, has installed most of its factories in China. This Monday, the authorities once again postponed their resumption of activity, based on a "high risk of contamination" among their employees.

Now Foxconn supplies most of the electronics giants. It manufactures iPhones for Apple, assembles Amazon Kindle tablets or smartphones for the Chinese firm Huawei, lists Le Figaro when Le Point adds Sony, Motorola, LG, HTC, Acer or even Microsoft to its impressive catalog of customers. .

Its reopening was therefore expected, even if it cannot resolve everything. And if production resumed, the company would nevertheless suffer the blow dealt to the entire logistics line by the measures taken in response to the epidemic, with in particular transport largely disrupted across the country. What severely undermine global stocks of high-tech consumer goods, a sector with relatively tight flows.

One week of accumulated delay

After the Chinese New Year holidays, prolonged by a week by the health crisis, production was actually due to resume on Monday in most factories in the Shenzhen region, which concentrates 80% of the manufacturing of electronic products in China. But they all remained closed, and they do not seem inclined to communicate on the subject. Contacted, the Chinese Xiaomi (4th manufacturer of smartphones in the world) and Oppo (5th) did not respond to our requests.

"These factories are subject to the inspection of an official authority responsible for assessing risks," explains Emmanuel Peype, co-founder of FastLane. It can take a week, however, and the first requests have barely been registered. In other words, according to the director of this agency based in Shenzhen and which helps Chinese companies to internationalize, the vagueness is total.

"My customers do not know what the impact of these disruptions will be on the export of their products," he adds. This should not prevent all brands from continuing to advertise new devices, some of which have already left the factory. But "their sale in Europe will however be postponed because Chinese manufacturers still favor their domestic market," he predicts.

"Fragilities"

For Valérie Niquet, Asia manager at the Strategic Research Foundation, the current epidemic "highlights the weaknesses" in the functioning of the sector. "We are in a globalized system where almost all of the production of a sector is concentrated in a single country", she analyzes.

The past has already shown that the importance given to China can turn against large globalized companies. "A few years ago, the luxury sector had seen the market value of some of its leaders fall while President Xi Jinping launched a great fight against corruption," she points out.

Despite its recent truce, the economic war between China and the United States may also raise fears of an upcoming embargo on all products produced in the country, or at least the introduction of prohibitive customs tariffs for entry. in the American market.

offshoring

Aware of the vulnerability that this situation represents, the Foxconn group had already started, even before the start of the epidemic, a return to other production areas. "This partial relocation is undoubtedly also inspired by the rise in the price of labor in China, when Cambodia, Vietnam and overall Southeast Asia remain places with low production costs", says Valérie Niquet.

It would not be illogical, in these conditions, to see other companies move part of their factories outside the country in the coming years. The coronavirus, if it caused shortages of their stocks around the world and therefore paralyze their sales, could accelerate the movement.