The recent coronavirus outbreak’s disruptions to the mobile phone supply chain in Asia could reduce shipments in the first quarter and delay deliveries in the coming weeks. Phone makers and their component suppliers are scrambling to soften the impact of COVID-19, but labor and raw materials shortages and transportation restrictions are putting pressure on their manufacturing and logistics operations.
Phone component manufacturers in China, South Korea and Japan will likely avoid a large-scale reduction in supply, but product deliveries could be delayed because of the virus (see Figure 1 above). For the most part, component suppliers have kept their heads above water thanks to adequately stocked inventories, automation and existing protocols that have helped mitigate shortages of materials and available workers and other effects of the outbreak.
Hubei—the Chinese province whose capital is Wuhan, the epicenter of the outbreak—isn’t a major phone production hub. But some nearby provinces that have been hit hard by the virus, including Guangdong, are home to significant mobile phone manufacturing bases (see Figure 2 above). A lack of available workers and insufficient protective supplies have dampened their production capacity and will likely reduce phone shipments in the short term, but it’s hard to predict how much.
The overall impact of the virus on the mobile phone supply chain should be limited in the long run, but manufacturers will have to ramp up their operations to meet pent-up demand after the outbreak is contained.
Moonsup Shin and Shu Li are Bain & Company partners and coleaders of the Technology practice in Greater China. Moonsup is based in Seoul and Greater China, and Shu is based in Hong Kong. Xin Cheng is a Bain principal based in Beijing.
As the global pandemic deepens and the human cost of Covid-19 rises, the novel coronavirus outbreak is sending shocks through the world economy. But across industries, companies can take action now to protect their employees and customers and minimize the economic damage.