In February, global smartphone shipments tumbled 38 per cent from a year ago to 61.8 million units, the largest decline on record, according to Strategy Analytics.

The slump in sales will be a blow to China’s smartphone factories, including Apple’s manufacturing partner Foxconn, and could further destabilise the nation’s position in the global industrial chain.

“China is the largest smartphone, PC, tablet, CE, and automotive market in the world,” said Mario Morales, vice-president of semiconductors and enabling technologies at IDC. “[It] drives one-third of semiconductor demand or about US$130 billion.

“[But] we expect demand to be weak this year in China and worldwide as consumer sentiment and behaviour changes.”

Increased trade in hi-tech products, broadly defined by Beijing as everything from integrated circuits to electronics gadgets, has been a major factor underlying China’s ascent in global value chains.

In many areas, including semiconductors and medical equipment, China is a major hub for the manufacturing and processing of hi-tech goods, importing the components it lacks and assembling them for both local consumption and international exports.

Official statistics show China’s shipments of “advanced technology products” amounted to US$730 billion in 2019, or about a third of total exports.

But that is set to change as the coronavirus ripples through global supply chains and saps international demand.

Research firm IDC said in a forecast in March that there is an 80 per cent chance of a significant contraction in semiconductor revenues in 2020 due to the pandemic.

“About 40 per cent of global supply of integrated circuits were shipped to China last year and we estimated half of those were consumed by the Chinese economy, the other half were assembled in China through electronics products and shipped to other parts of the world,” said Risto Puhakka, a semiconductor industry expert at VLSI Research.

China’s global share of intermediate exports of electrical circuits was 16 per cent in 2018, while equipment for distributing electricity was 17 per cent, French bank Natixis said. Both of these would include semiconductor components.

In April 2018, the US announced US$50 billion in tariffs that would directly hit semiconductor companies by making imported equipment and materials more expensive. A chip finished in China would be subject to a 25 per cent tariff, even if its components had been made in the US.

The US has also imposed export restrictions on China’s Huawei, the world’s largest telecommunication equipment company, citing national security concerns, and effectively banning the export of American technology and products to the Shenzhen-based firm.

“Various initiatives are trying to change the dependency of foreign technology usage in China but the migration has been slower than expected,” Morales said.

“The semiconductor industry is not only capital intensive but intellectual property intensive and China is still trying to catch up to the leaders like TSMC, Intel, Samsung, Qualcomm, Xilinx, NVIDIA, AMD, and others.”

Bilateral trade in advanced tech goods between the US and China has declined since May 2019 because of tariffs and export restrictions, said a report produced by Bank of China Securities in March.

Despite the signing of phase one trade deal in January this year, both countries have kept tariffs in place on many tech products.

“Even if there is no impact from the epidemic, China’s global industrial chain is still in a less stable state. China’s export upgrades and the industrial chain are inherently under international pressure,” Bank of China Securities said in its report.

US imports of Chinese medical products, which are subject to the 10 to 25 per cent tariff introduced in 2018, dropped by 16 per cent – or nearly US$200 million – between 2017 and 2019, according to a report published in March by the Peterson Institute of International Economics (PIIE).

“The differences were especially large in CT systems, patient monitors and pulse oximeters, and certain types of disposable medical headwear,” the report said.

As the coronavirus spreads in the US, Washington has signalled a willingness to remove tariffs on medical supplies from China and has granted tariff waivers for more than 100 medical items, including face masks, medical gloves and sanitising wipes.

However, ongoing disruptions to global supply chains caused by the pandemic pose steep challenges for the trade of advanced technology.

A total of 70 countries had introduced export curbs on key medical supplies in 2020 by the end of March, according to the Global Trade Alert, a trade-policy monitoring service at the University of St Gallen in Switzerland.

Some countries in the European Union have introduced bans or limits on exports within the region. China has sought to reassure global buyers it will not impose export curbs on medical supplies, although exports of some medical products fell in February.

Shipments of goggles, visors and mouth-nose-protective equipment declined by more than 15 per cent, while exports of protective garments and gloves fell by almost 15 per cent.

The Peterson Institute attributed the fall to a spike in Chinese domestic demand and the extended Lunar New Year holiday, which shut factories for longer than expected.

China accounted for 46 per cent of medical equipment imported by the European Union in 2019, worth about US$8.1 billion, the PIIE estimated. But European Union export controls on components needed by China have added uncertainty for Chinese exports in the coming weeks.

Furthermore, White House trade adviser Peter Navarro is pitching a new “Buy America” executive order aimed at cutting US reliance on Chinese-made pharmaceuticals and other medical supplies.

Analysts said that the disruption caused by the coronavirus was likely to add to questions already being asked about overreliance on China's supply chains.

“Companies outside China, for diversity and security [are asking], should they have an additional supply chain outside China?” Puhakka from VLSI Research said.

“That trend had already started because of the trade war with the US, we tend to think that direction is likely to continue, that is a bigger threat for China.”