The latest major multinational to issue a warning to its performance because of the outbreak of the novel coronavirus and the resultant disruption in China was Microsoft, as the tech giant said that its operations could be disrupted due to the virus outbreak.
The manufacturing activities and operations of the company have already been affected because of the prolonged shutdown of the factories in China of companies in its supply chain since the usual Lunar New Year Holiday at the end of January, the tech giant said.
Microsoft warned that the disruption in its Chinese supply chain or those vendors who have their major manufacturing bases in China could potentially negatively impact the inventory and sale of the personal computing business of the company – including that of its Surface laptops and tablets.
While easing of restrictions in China has allowed many factories to reopen in China, the pace at which this is happening is very slow and companies are finding it difficult to start production at full capacity because of a shortage of workers still, Microsoft said.
This announcement, along with previous announcements by other tech firms such as Apple, reflects that issues that the tech industry is facing of over-dependence on a complex supply chain with major suppliers in China for supply of crucial parts for just-in-time production through real time deliveries.
“With Apple the first one of the tech bellwethers to confirm the damaged supply chain post the coronavirus outbreak last week, it should not be a shocker … (that Microsoft’s) PC business is going to be under near-term pressure related to supply chain issues in the region,” said Wedbush Securities analysts Daniel Ives and Strecker Backe in a note.
The disruption caused in their supply chains – both forced by government directions in China as well as voluntary closures, has affected other computer and electronics makers. Factories in China have been directed by Chinese authorities to take additional health related initiatives to allow workers to remain at home to prevent further spreading of the coronavirus.
For example, Apple’s major suppliers and assembler of its iPhones – Foxconn, has said that it is slowly trying to reopen the factories and bring them up to full production capacity but has admitted that the pace of progress is slow because it is taking measures to ensure workers’ health and safety.
“While our facilities in China have been delayed in their return to normal operations, our facilities in a number of other markets, including Vietnam, India and Mexico, are running at full capacity and expansion plans for some of our global facilities are being rolled out,” Foxconn said in a statement.
Many multinational companies that have a chunk of their suppliers in China or source products from the country are struggling to get the parts they need to make their products delivered as many of the factories that had been shut down on the eve of the Chinese New Year break still remain closed.
Those car manufacturers that depend on supply of essential parts from China are being forced to close down or scale down production in plants outside of China.
(Adapted from BBC.com)