Coronavirus: as China reopens, tech firms find supply-chain disruptions continue elsewhere
- China, beset by the outbreak, was where disruptions began, but as the pandemic spread globally, so did plant closings and lockdowns
- Apple, Intel and Qualcomm all point to vulnerabilities beyond China
When China announced the reopening of its factories at the end of March, it helped alleviate the pressure many of the world’s technology companies had come under since the coronavirus outbreak began. But the broken supply chain is far from back to normal.
In a survey by the Institute for Supply Management, a US trade association, 80 per cent of 600 US responding companies believed they would be affected by supply-chain disruptions in early March. By the end of March, that number rose to 95 per cent. Most respondents anticipated that the severity would increase in other parts of the world – especially in North America, Japan, Korea and Europe – after China reopened.
“China isn’t the biggest problem anymore. Unfortunately, we are in a worse position now because as the virus spread, the rest of the world got pneumonia,” said Kamala Raman, a senior director of supply chain at the research and advisory firm Gartner. “Now we need to address all the complications.”
While China ramped up manufacturing capacity, tech companies were hit by new waves of supply-chain headaches as the pandemic spread globally. The virus has ravaged countries from Italy and Mexico to the United States, infecting 45 times more people than China’s own official count of confirmed cases. National stay-at-home orders and the shutting of factories have led to an even bigger shortage of workers and transportation disruptions, further exacerbating the supply-chain disruptions.
For the first week of April, global air cargo capacity dropped 35 per cent year-on-year, according to Seabury Consulting. The routes from Europe to North America were the most affected, with a drop-off of 60 per cent of capacity; air cargo fell 15 per cent from China to North America.
Air cargo rates also jumped more than 10 times, as shipping demand surged while the world rushed to obtain personal protective equipment to help shield health care workers. Air freight base rates generally start at US$1.50 per kilogram, or 68 cents per pound, according to the World Bank. Today, the lowest freight rate is at US$7.38 per pound, according to the UPS website.
US tech companies are particularly vulnerable to supply chain disruptions, with a single product often requiring hundreds of parts from multiple countries. Many of those parts also involve numerous manufacturing steps, all completed in factories overseas.