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Musing on COVID-19
The Situation in China
March 08, 2020
Reports from China indicate that the country is getting back to work and that assemblers like Foxconn, Pegatron and Wistron that employ 100s of thousands have reached 50% employment levels and expect to be at near full capacity by early April. Obviously, there is a type of domino effect, where it takes companies at the beginning of the supply chain to start delivering material/components before assembly can be effective. But the march is on.
What is not as clear, is the demand side; China’s market consumes 24% of TVs, 16% of tablets, 15% of TVs and 27% of smartphones. In 2019, this purchasing power amounted to a total of 500m units (25%) and $171b (21%) in revenue worldwide. How fast the buying power in China will recover is still an unknown.
Here are some recent measures of progress and forecasts from our friends at Mizuho Securities.
Demand Side:
Figure 1: Major Markets and Smartphones Impacted by COVID-19
Musing on COVID-19
The Situation in China
March 08, 2020
Reports from China indicate that the country is getting back to work and that assemblers like Foxconn, Pegatron and Wistron that employ 100s of thousands have reached 50% employment levels and expect to be at near full capacity by early April. Obviously, there is a type of domino effect, where it takes companies at the beginning of the supply chain to start delivering material/components before assembly can be effective. But the march is on.
What is not as clear, is the demand side; China’s market consumes 24% of TVs, 16% of tablets, 15% of TVs and 27% of smartphones. In 2019, this purchasing power amounted to a total of 500m units (25%) and $171b (21%) in revenue worldwide. How fast the buying power in China will recover is still an unknown.
Here are some recent measures of progress and forecasts from our friends at Mizuho Securities.
Demand Side:
- General China
- 20% share for completed products
- 50% Y/Y decline in Q120
- 20% Y/Y Decline Full Year; assuming major resolution of issues caused by virus
- Ex-China Demand
- No change to forecasts
- Some downside if virus spreads and Olympics cancelled
- China Demand Smartphones – Q120 Depends on OEM’s inventory
- Q120 –Component/Material Availability Tight
- Balance between rising prices vs. lower end user demand
- Hubei Supply chain resumes early March, with weaknesses in
- Rigid PCB
- Power Supply
- Heat Dissipation Material
- BL Materials
- Ex-Hubei –Restarted Feb 10, but 7-14 day quarantine for returnees from outside the province
- Status
- FPD – Array Process Underway, Inventory build-up for semi-finished products, Module process restarting slowly
- Operational Forecast – 30% in February; 50% in March, 70% in A-ril, 80% in May
- Electronic OEMs -- 30% to 40% of marginal profit impact
- Upstream – 50% to 60% marginal profit impact
- FPD Equipment Makers -- 6 month delay in shipments
Figure 1: Major Markets and Smartphones Impacted by COVID-19
Source: Mizuho Securities Equity Research from IHS, IDC
Figure 2: TV and PC Market in China Impacted by COVID-19
Source: Mizuho Securities Equity Research from IHS, IDC
Positive: Unintended Consequences of COVID-19.
But it’s not all bad, the slowdown in production and travel has led to unprecedented levels of clean air between Beijing and Wuhan.
Figure 3: Air Pollution (nitrogen dioxide) in China
But it’s not all bad, the slowdown in production and travel has led to unprecedented levels of clean air between Beijing and Wuhan.
Figure 3: Air Pollution (nitrogen dioxide) in China
Source: Morning Brew